Percentage of Completion Method with Change Orders
The Build It Construction Company enters into a contract on January 1, 2008, to construct a 20 story office building for $42,000,000. During the construction period, many change orders are made to the original contract. The following schedule summarizes the changes made in 2008.
|
Cost Incurred— |
|
Estimated |
|
|
2008 |
|
Cost to Complete |
Contract Price |
|
Basic contract |
$8,000,000 |
$28,000,000 |
$42,000,000 |
|
Change Order 1 |
50,000 |
50,000 |
125,000 |
|
Change Order 2 |
0 |
50,000 |
0 |
|
Change Order 3 |
300,000 |
300,000 |
Still to be negotiated; |
|
|
|
|
at least cost |
|
Change Order 4 |
125,000 |
0 |
100,000 |
Compute the revenues, costs, and gross profit to be recognized in 2008, assuming use of the cost to cost method to determine the percentage completed. (Round percentage to two decimal places.)