Compute the amount of revenue and gross profit or loss

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Reference no: EM131891395

Problem

On June 15, 2016, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $420 million. The expected completion date is April 1, 2018, just in time for the 2018 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions):

 

2016

2017

2018

  Costs incurred during the year

50

150

60

  Estimated costs to complete as of December 31

200

120

-

Part 1

Compute the revenue and gross profit will Sanderson report in its 2016, 2017, and 2018 income statements related to this contract assuming Sanderson recognizes revenue over time according to percentage of completion.

Part 2

Compute the amount of revenue and gross profit or loss to be recognized in 2016, 2017, and 2018 using the completed contract method.

Part 3

Suppose the estimated costs to complete at the end of 2017 are $200 million instead of $120 million. Compute the amount of revenue and gross profit or loss to be recognized in 2017 using the percentage of completion method.

Reference no: EM131891395

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