Reference no: EM132485443
Problem - Percentage of Completion
On January 1, 2013, Duchac Construction Inc. began work on a three-year construction contract. The terms of the contract specified:
Contract Price = $9,000,000
Estimated Cost to construct = $7,500,000
The actual and estimated costs, billings and are as follows:
|
|
2013
|
2014
|
2015
|
|
Costs incurred during the year
|
$2,400,000
|
$3,600,000
|
2,000,000
|
|
Estimated costs to complete (@ Dec. 31)
|
5,100,000
|
2,000,000
|
-----
|
|
Total Estimated Costs
|
|
|
|
|
Percent Complete
|
|
|
|
|
Billings during the year
|
3,000,000
|
4,000,000
|
2,000,000
|
|
Collections during the year
|
2,800,000
|
3,200,000
|
3,000,000
|
Required -
1. What is the amount of profit to be recognized over the life of the contract?
2. What percentage of complete is the project on the following dates: 2013, 2014 and 2015?
3. Assume that Duchac uses the percentage of completion method. What amount of revenue, expense and net income should Duchac recognize in 2013, 2014, and 2015?