Calculate the amount of gross profit

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Problem - King Corporation started the construction of a building during 2017 at a contract price of $5,000,000. The contract to build was non-cancellable and they managed to complete the project in 2019 as anticipated. Billings are nonrefundable and under the terms of the project, King sends billings to the vendor as revenues are earned. The following additional information is available:

 

2017

2018

2019

Costs to-date

$800,000

$2,500,000

$4,800,000

Estimated costs to complete

$2,400,000

$2,500,000

$0

Required -

a. Calculate the amount of revenue to be recognized each year using the percentage of completion method. (2017, 2018 & 2019).

b. Calculate the amount of gross profit/loss that should be recognized (2017, 2018 & 2019) each year using the percentage-of-completion method.

c. What is the amount of gross profit/loss that should be recognized each year under the completed-contract method?

Reference no: EM132470707

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