Question 2 During 2014, Antoinette started a construction job with a contract pr

Question

Question 2 During 2014, Antoinette started a construction job with a contract price of $2.8 million. The job was completed in 2016 and information for the three years of construction is as follows:

2014 2015 2016

Costs incurred to date $1,230,000 $1,765,000 $1,965,000

Estimated costs to complete 850,000 175,000 –0–

Billings to date 1,000,000 1,880,000 2,800,000

Collections to date 710,000 1,720,000 2,800,000

Calculate the amount of gross profit / (loss) that should be recognized each year under the percentage-of-completion method. (Round percent complete to 2 decimal places, e.g. 52.75%. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Under the earnings approach:

Explanation / Answer

$ Particulars 2014 2015 2016 Costs incurred to date 1,230,000 1,765,000 1,965,000 Estimated costs to complete     850,000 175,000 -   Total Cost 2,080,000 1,940,000 1,965,000 percentage-of-completion 59.13% 90.98% 100% (Costs incurred to date/Total cost Contract price 2,800,000           2,800,000           2,800,000 Revenue to be recognised 1,655,769           2,547,423           2,800,000 (Contract price*percentage-of-completion) Costs incurred to date 1,230,000           1,765,000           1,965,000 Profit or loss to be recognised(Cummulative)     425,769             782,423             835,000 Profit or loss to be recognised in each year     425,769             356,653               52,577 (782422-425769) (835000-782423)

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