Costs incurred during the year $1,400,000 Estimated costs to complete as of Dece

Question

Costs incurred during the year $1,400,000

Estimated costs to complete as of December 31 2014, $600,000

Billings during the year $1,000,000

Collections during the year $900,000

       $700,000
       $0
       $1,400,000
       $2,100,000

A) Windsor Construction Company uses the completed contract method of accounting. In 2014, Windsor began work on a two year contract it had received which provided for a contract price of $3,000,000. Other details follow for 2014:

Costs incurred during the year $1,400,000

Estimated costs to complete as of December 31 2014, $600,000

Billings during the year $1,000,000

Collections during the year $900,000

What should be the gross profit recognized in 2014? (Points : 5)

Explanation / Answer

Solution-

$0

Explanation-

In the completed contract method revenue is consider onlly if the contract is completed but in year 2014 revenue will be zero because assigned contract is comleted in 2016.

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