Reference no: EM132485338

Marks Construction is experienced in bidding on long-term construction projects of this type, with the typical project lasting from 15 to 24 months. Marks uses the percentage-of-completion method. Progress toward completion is measured on a cost-to-cost basis. Marks began work on a contract at the beginning of 2019.

Data for 2019 follow:

Contract price                       $2,000,000

Estimated costs

Labour                                  $425,000

Materials and subcontracts        875,000

Indirect Costs                        200,000

                                        1,500,000

Estimated gross profit            $500,000

At the end of 2019, the following was the actual status of the contract:

Progress Billings to date         $1,115,000

Costs incurred to date

Labour                                   $207,000

Materials & subcontracts             519,000

Indirect costs 75,000                801,000

Latest forecast of total costs     1,500,000

Point 1: It should be noted that included in the above costs incurred to date were standard electrical and mechanical materials stored onthe job site, but not yet installed, costing of $51,000. Thesecosts should not be considered in the costs incurred to date.

Instructions

Question 1: Calculate the percentage of completion on the contract at the end of 2019.

Question 2: Calculate the gross profit that would be reported on this contract for 2019.

Question 3: Prepare the journal entry to record the revenue and gross profit for 2019 on Mark's books.

Question 4: Indicate the account(s) and the ammount(s) that would be shown on Mark's statement of financial position. Cash collected during the year was $980,000.

Question 5: Assume, instead of $1,500,000, the latest forecast of total costs at the end of 2019 was $2,050,000. How much income (loss) would Mark the report for the year 2019?