Jot Construction Company uses the percentage-of-completion method of accounting.

Question

Jot Construction Company uses the percentage-of-completion method of accounting. In 2013, Jot began work on a contract it had received which provided for a contract price of $6,000,000. Additional information related to the project includes: costs incurred during the year were $2,100,000; estimated costs to complete as of December 31, 2013 were $1,400,000; billings during the year were $3,600,000; collections during the year totaled $3,000,000. What amount should Jot recognize as gross profit for the project in 2013?

Explanation / Answer

contract price--------------------------$6,000,000 Progress billings------------------------$3,600,000 Costs incurred--------------------------$2,100,000 Collections -----------------------------$3,000,000 Estimated costs to complete--------$1,400,000 gross profit for 2013=($2,100,000/($2,100,000+$1,400,000)*($6,000,000 – $2,100,000-1,400,000) =$1,500,000

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