Reference no: EM132473388

Question - Pharoah Construction Company began operations on January 1, 2017. During the year, Pharoah Construction entered into a contract with Lundquist Corp. to construct a manufacturing facility. At that time, Pharoah estimated that it would take 5 years to complete the facility at a total cost of $4,540,000. The total contract price for construction of the facility is 56,001,000. During the year, Pharoah incurred $1,132,950 in construction costs related to the construction project. The estimated cost to complete the contract is $4,262,050. Lundquist Corp. was billed and paid 23% of the contract price.

Required - Prepare schedules to compute the amount of gross profit to be recognized for the year ended December 31, 2017, and the amount to be shown as "costs and recognized profit in excess of billings" or "billings in excess of costs and recognized profit" at December 31, 2017, under each of the following methods.

(a) Completed-contract method.

(b) percentage-of-completion method.