Problem:
On June 15, 2011, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington D.C. for $222 million. The expected completion date is April 1 of 2013, just in time for the 2013 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions):
2011 2012 2013
Costs incurred during the year $40 $80 $50
Estimated costs to complete as of 12/31 120 60 -
1. Determine the amount of gross profit or loss to be recognized in each of the three years using the percentage-of-completion method. (Enter your answers in millions. Do not round intermediate calculations. Round final answers to 2 decimal places. Loss amounts should be indicated with a minus sign. Omit the "$" sign in your response.)
2. How much revenue will Sanderson report in its 2011 and 2012 income statements related to this contract using the percentage-of-completion method? (Enter your answers in millions. Do not round intermediate calculations. Round final answers to 2 decimal places. Omit the "$" sign in your response.)
3. Determine the amount of gross profit or loss to be recognized in each of the three years using the completed contract method. (Enter your answers in millions. Leave no cells blank - be certain to enter "0" wherever required. Loss amounts should be indicated with a minus sign. Omit the "$" sign in your response.)
4. Determine the amount of revenue, cost, and gross profit or loss to be recognized in each of the three years using the cost recovery method that is required by IFRS. (Enter your answers in millions. Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive number except "Loss", loss amounts should be indicated with a minus sign. Omit the "$" sign in your response.)
5. Suppose the estimated costs to complete at the end of 2012 are $80 million instead of $60 million. Determine the amount of gross profit or loss to be recognized in 2012 using the percentage-of-completion method. (Enter your answer in millions. Loss amount should be indicated with a minus sign. Do not round intermediate calculations. Round final answers to 2 decimal places. Omit the "$" sign in your response.)