Determine the amount of gross profit

Assignment Help Cost Accounting

Reference no: EM13298303

On June 15, 2006, Sanderson Constructionentered into a long-term construction contract to build a baseballstadium in Washington D.C. for $220 million. The expectedcompletion date is April 1 of 2008, just in time for the 2008baseball season. Cost incurred and estimated costs to complete atyear-end for the life of the contract are as follows ($ inmillions):

2006 2007 2008

Costs incurred during theyear $40 $80 $50

Estimated costs to complete as of 12/31 120 60 0

Required:

1. Determine the amount of gross profit or loss to berecognized in each of the three years using the percentage-of-completion method.

2. How much revenue will Sanderson report in its 2006 and 2007 income statements related to this contract using thepercentage-of-completion method?

3. Determine the amount of gross profit or loss to berecognized in each of the three years using the completed contract method.

4. Suppose the estimated costs to complete at the end of 2007are $80 million instead of $60 million. Determine the amount ofgross profit or loss to be recognized in 2007 using thepercentage-of-completion method.

Reference no: EM13298303

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