Calculate the revenue to be recognized and gross profit

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Question - Precision Construction Co. has agreed to build a 10 storey office building for MB Limited. The contract is for $10 million with progress payments being made by MB Limited as the construction proceeds. The construction begins in February 2018 and is completed in December 2020. Assume that MB Limited will own the office building over the period of construction and that Precision Construction Co. uses the percentage of completion method for construction contracts. Data on costs incurred, estimated costs to complete, progress billings, and progress payments over the period of construction are as follows. (amounts are in $000's)

 

2018

2019

2020

Costs incurred this period

$1,040

$5,210

$1,563

Costs incurred to date

1,040

6,250

7,813

Estimated costs to complete the project

6,960

1,562.5

0

Progress billings this period

800

4,000

5,200

Progress payments received this period

0

3,250

4,750

Required - Calculate the revenue to be recognized and gross profit (in dollars) for 2018 and 2019.

Reference no: EM133078258

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