Percentage of Completion Analysis
Smokey International Inc. recently acquired the Kurtz Builders Company. Kurtz has incomplete accounting records. On one particular project, only the information below is available.
|
|
2007 |
2008 |
2009 |
|
Costs incurred during year |
$200,000 |
$250,000 |
? |
|
Estimated cost to complete |
450,000 |
190,000 |
$ 0 |
|
Recognized revenue |
220,000 |
? |
? |
|
Gross profit on contract |
? |
10,000 |
(10,000) |
|
Contract price |
850,000 |
|
|
Because the information is incomplete, you are asked the following questions assuming the percentage of completion method is used, an output measure is used to estimate the percentage completed, and revenue is recorded using the actual cost approach.
1. How much gross profit should be reported in 2007?
2. How much revenue should be reported in 2008?
3. How much revenue should be reported in 2009?
4. How much cost was incurred in 2009?
5. What are the total costs on the contract?
6. What would be the gross profit for 2008 if the cost to cost percentage of completion method were used rather than the output measure?