Problem 18-2

keryda

P18-2.

(Recognition of Profit on Long-Term Contract)

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

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