On February 1,2007, Nance Contractors agreed to construct a building at
a contract price of $6,000,000. Nance estimated total construction costs would
be $4,000,000 and the project would be finished in 2009. Information relating
to the costs and billings for this contract is as follows:
2007 2008 2009
Total costs incurred to date $1,500,000
$2,640,000 $4,600,000
Estimated costs to complete 2,500,000
1,760,000 -0-
Customer billings to date 2,200,000
4,000,000 5,600,000
Collections to date 2,000,000
3,500,000 5,500,000
Instructions
Fill
in the correct amounts on the following schedule. For percentage-of-completion accounting and for
completed-contract accounting, show the gross profit that should be recorded for 2007.
Percentage-of-Completion Completed-Contract
Gross Profit Gross Profit
2007 _________________ 2007 __________________
2008 _____ 2008 __________________
2009 _________________ 2009___________________
SOLUTION PREVIEW
(a) Computation
of Recognizable Profit/Loss
Percentage-of-Completion
Method
2007
Costs to date
(12/31/07) $1,500,000
Estimated costs to
complete 2,500,000
Estimated
total costs $4,000,000
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