ACC 305 Week 2 Assignment E5-10
Sanderson Construction entered
into a long-term construction contract to build
E5-10
On June 15, 2011, Sanderson Construction entered into a long-term construction
contract to build
E5-10
Long-term contract; percentage of completion, completed contract and cost
recovery methods
E5-10 On
June 15, 2011, Sanderson Construction entered into a long-term construction
contract to build a baseball stadium in Washington D.C. for $220 million. The
expected completion date is April 1 of 2013, just in time for the 2013 baseball
season. Costs incurred and estimated costs to complete at year-end for the life
of the contract are as follows ($ in millions):
2011
2012 2013 Costs incurred during the year $40 $80 $50 Estimated costs to
complete as of 12/31
1. Determine the amount of gross profit or loss to be recognized in each of the
three years using the percentage- of-completion method.
2. How much revenue will Sanderson report in its 2011 and 2012 income
statements related to this contract using the percentage-of-completion method?
3. Determine the amount of gross profit or loss to be recognized in each of the
three years using the completed contract method.
4. Determine the amount of revenue, cost, and gross profit or loss to be
recognized in each of the three years under IFRS, assuming that using the
percentage-of-completion method is not appropriate.
5. Suppose the estimated costs to complete at the end of 2012 are $80 million
instead of $60 million. Determine the amount of gross profit or loss to be
recognized in 2012 using the percentage-of-completion method.
SOLUTION PREVIEW
Requirement
1
($ in millions) 2011 2012 2013
Contract price $220 $220 $220Actual costs to date 40 120 170
Estimated costs to complete 120 60 - 0 -
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