Howard Construction Co. contracted to build a bridge for $3,000,000. Constructio

Question

Howard Construction Co. contracted to build a bridge for $3,000,000. Construction began in 2012 and was completed in 2013. Data relating to the construction are:

Howard uses the percentage-of-completion method.

Questions
1. How much revenue should be reported for 2012?  
2. Make the entry to record progress billings of $1,000,000 during 2012.
3. Make the entry to record the revenue and gross profit for 2012.
4. How much gross profit should be reported for 2013?
5. Show the Balance Sheet Presentation for 2012.  

2012 2013 Costs Incurred $900,000 $825,000 Estimated costs to complete 810,000 -

Explanation / Answer

Total cost incurred in 2012 and 2013 = $900,000 + 825,000
                                                                   = $1,725,000
1.

percentage cost incurred in 2012 = 900,000/1,725,000 = 52.17 %
Therefore 52.17% of the project is completed in 2012
Therefore revenue recognized in 2012 = 52.17% of total cost
= 0.5217 * 3,000,000
=$1565100

2.

Acounts receivable

1000,000

Billing on construction process

1000,000

3.

Revenue 2012 = $1565100
Profit = $1565100 - 900,000 = $665100

construction expenses

1000,000

construction in process

565100

Revenue from long term contrac

1565100

4.

Revenue recognized in 2013 = (825,000/1,725,000 ) * 3,000,000
                                                     = $1434782.60
profit = $1434782.60 - $825,000
        = $634782.60

Acounts receivable

1000,000

Billing on construction process

1000,000

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