Question:
On 15th June, 2013, Sanderson Construction entered into a long-term construction contract to prepare a baseball stadium in Washington D.C. for $260 million. The expected completion date is April 1 of 2015, just in time for the 2015 baseball season. Costs incurred and evaluated costs to complete at year-end for the life of the contract are as follows ($ in millions):
2013 2014 2015
Costs incurred during the year $ 60 $ 80 $ 65
Evaluated costs to complete as of 12/31 140 60 -
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Required:
1.
Evaluate the amount of gross profit or loss to be recognized in each of the three years using the percentage-of-completion technique. (Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).)
2.
How much revenue may Sanderson report in each of three years using the percentage-of-completion technique?
3.
Evaluate the amount of gross profit or loss to be recognized in each of the three years using the completed contract technique.
4.
Evaluate the amount of cost, revenue, and gross profit or loss to be recognized in each of the three years using the cost recovery technique that is required by IFRS.
5.
Consider the estimated costs to do at the end of 2014 are $110 million instead of $60 million. Evaluate the amount of gross profit or loss to be recognized in 2014 using the percentage-of-completion technique.