Shanahan Construction Company has entered into a contract beginning January 1, 2014

P18-2.  Recognition of Profit on Long-Term Contract)

P18-2 Shanahan Construction Company has entered into a contract beginning January 1, 2014, to build a parking complex. It has been estimated that the complex will cost $600,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $900,000. The following data pertain to the construction period.

2014 2015 2016 Costs to date $270,000 $450,000 $610,000 Estimated costs to complete  330,000   150,000  -0- Progress billings to date  270,000   550,000   900,000  Cash collected to date  240,000   500,000   900,000

Instructions

Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period.

Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period.

TUTORIAL PREVIEW

(a)

	2014	2015	2016
Contract price	$900,000	$900,000	$900,000
Less estimated cost:
Costs to date	270,000	450,000	610,000

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