Yanmei Construction Company began operations on January 1, 2014. During the year
ID: 2475627 • Letter: Y
Question
Yanmei Construction Company began operations on January 1, 2014. During the year, Yanmei Construction entered into a contract with Lundquist Corp. to construct a manufacturing facility. At that time, Yanmei estimated that it would take 5 years to complete the facility at a total cost of $4,680,000. The total contract price for construction of the facility is $6,240,000. During the year, Yanmei incurred $1,233,232 in construction costs related to the construction project. The estimated cost to complete the contract is $4,372,368. Lundquist Corp. was billed and paid 25% of the contract price.
Prepare schedules to compute the amount of gross profit to be recognized for the year ended December 31, 2014, and the amount to be shown as “costs and recognized profit in excess of billings” or “billings in excess of costs and recognized profit” at December 31, 2014, under each of the following methods.
Explanation / Answer
(1) Completed Contract Method
Gross profit to be recognized for the year ended December 31, 2014
Billings on Uncompleted Contract in Excess of Related Costs
(2) Percentage-of Completion Method
Gross profit to be recognized for the year ended December 31, 2014
Billings on Uncompleted Contract in Excess of Related Costs and Recognized Profit
Gross Profit to be recognized No gross profit to be recognized prior to completion of ContractRelated Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.