Problem
Shanahan construction company has entered into a contract beginning January 1st, 2014, to build a parking complex. It has been estimated that the complex will cost $600,000 and will take three years to construct. The complex will be billed to the purchasing company at $900,000. The following data pertain to the construction period, cost to date 2014 $270,000 2015 $450,000 2016 $610,000 estimated cost to complete 2014 $330,000 2015 a hundred and $50,000 2016 $0 progress Billings to date 2014 $270,000 2015 $550,000 2016 $900,000 cash collected to date 2014 $240,000 2015 $500,000 2016 $900,000
a. Using the percentage of completion method, compute the estimated gross profit that would be recognized during each year of the construction.
b. Using the completed contract method, compute the estimated gross profit that would be recognized during each of the construction.