Reference no: EM132709739

Problem - On December 31, 2014, State Construction Inc. signs a contract with the state of West Virginia Department of Transportation to manufacture a bridge over the New River. State Construction anticipates the construction will take three years. The company's accountants provide the following contract details relating to the project:

Contract price $520 million

Estimated construction costs $400 million

Estimated total profit $120 million

During the three-year construction period, State Construction incurred costs as follows:

2015 $40 million

2016 $240 million

2017 $120 million

Required - Compute the following items for each year using the cost-to-cost method:

1. revenue recognized

2. construction costs expensed

3. gross profit earned