Reference no: EM132078501

Question 1 - Bruner Constructors, Inc. has consistently used the percentage-of-completion method of recognizing income. In 2014, Bruner started work on a $42,000,000 construction contract that was completed in 2015. The following information was taken from Bruner's 2014 accounting records:

Progress billings	$13,200,000
Costs incurred	12,600,000
Collections	8,400,000
Estimated costs to complete	25,200,000

What amount of gross profit should Bruner have recognized in 2014 on this contract?

Question 2 - In 2015, Fargo Corporation began construction work under a three-year contract. The contract price is $4,800,000. Fargo uses the percentage-of-completion method for financial accounting purposes. The income to be recognized each year is based on the proportion of costs incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 2015, follow:

Balance Sheet
Accounts receivable-construction contract billings		$200,000
Construction in progress	$600,000
Less contract billings	480,000
Costs and recognized profit in excess of billings		120,000

Income Statement -

Income (before tax) on the contract recognized in 2015 $120,000

What was the initial estimated total income before tax on this contract?