4Great News! The Fulton Company has just been granted a contract to build a new

Question

4Great News! The Fulton Company has just been granted a contract to build a new baseball stadium in the New Jersey Meadowlands. The contract price is $65,000,000 and it will be built over a period of 5 years. Fulton has estimated that it will cost them $55,000,000 to build this stadium. Information pertaining to the progress of the construction is as follows: 20x1 20X2 20X3 20X4 20x5 Cost $4,160,000 $6,040,000 $12,660,000 $17,110,000 $16,030,000 Estimated cost to finish $47,840,000 $ 40,800,000 $ 27,940,000 $ 6,384,000 REQUIRED:(10 Points) A) What is the estimated gross profit at the time the bid was made? B) Complete the attached table for the percentage of completion method. C) Complete the attached table for the completed contract method. D) Did the company achieve their expected gross profit? How could this happen?

Explanation / Answer

A. The stimated gross profit when the bid was made = $10,000,000 ($65,000,000 - $55,000,000)

B. Since the tables are not provided, I have used my own tables.

C.

  

D. The company has achieved a gross profit of $9,000,000 as against $10,000,000 estimated at the time of bid.

20X1 20X2 20X3 20X4 20X5 Cost incurred during the year 4160000 6040000 12660000 17110000 16030000 Cost incurred to date 4160000 10200000 22860000 39970000 56000000 Estimated cost to complete 47840000 40800000 27940000 6384000 Total Cost 52000000 51000000 50800000 46354000 56000000 Cumulative Percentage of completion 8.00% 20.00% 45.00% 86.23% 100.00% Annual percentage of completion 8.00% 12.00% 25.00% 41.23% 13.77% Contract Price 65000000 65000000 65000000 65000000 65000000 Revenue 5200000 7800000 16250000 26798022 8951978 GrossProfit 1040000 1760000 3590000 9688022 -7078022

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