Shanahan Construction Company has entered into a contract beginning January 1, 2012, to build a parking complex. It has been estimated that the complex will cost $600,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $900,000. The following data pertain to the construction period.
|
|
2012 |
|
2013 |
|
2014 |
| Costs to date |
|
$270,000 |
|
$450,000 |
|
$610,000 |
| Estimated costs to complete |
|
330,000 |
|
150,000 |
|
-0- |
| Progress billings to date |
|
270,000 |
|
550,000 |
|
900,000 |
| Cash collected to date |
|
240,000 |
|
500,000 |
|
900,000 |
(a) Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period.
(b) Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period.