Question

On February 1, 2010, Marcos Contractors agreed to construct a building at a contract price of $3,000,000. Marcos estimated total construction costs would be $2,000,000 and the project would be finished in 2012. Information relating to the costs and billings for this contract is as follows:

? 2010?? 2011?? 2012?

Total costs incurred to date?$ 750,000?$1,320,000?$2,300,000

Estimated costs to complete?1,250,000? 880,000?-0-

Customer billings to date?1,100,000? 2,000,000?3,000,000

Collections to date?1,000,000? 1,750,000?2,950,000

Instructions

1. Fill in the correct amounts on the following schedule. For percentage-of-completion and for completed-contract accounting, show the gross profit that should be recorded for 2010, 2011, and 2012.

2. Prepare all entries for 2010, 2011, and 2012 for Marco.

3. Prepare Statement of Financial Position ends of 2010, 2012 and 2011(if any) under Percentage of-completion-method, completed-contract method.

Answer 1

Answer

1.

Year	Percentage-of-Completion Gross Profit		Year	Completed-Contract Gross Profit
2010	$375,000		2010	0
2011	$105,000		2011	0
2012	$220,000		2012	$700,000

Calculation:

For 2010 =$750,000×$1,000,000 / $2,000,000 = $375,000

For 2011

=$1,320,000×$800,000 / $2,200,000 =$480,000

Less : 2010 gross profit                  =($375,000)

2011 gross profit                             =$105,000

For 2012

Total revenue         $3,000,000

Total costs            $2,300,000

Total gross profit      $700,000

Recognized to date ($480,000)

2012 gross profit     $220,000

For Completed-Contract 2012

Total revenue        $3,000,000

Total costs           $2,300,000

Total gross profit     $700,000

(please post only one question)