Business, 15.02.2021 20:10 christinasmith9633
Hometown Construction Corp. entered into a long-term contract to build an office building for Outsider Corp. at a fixed contract price of $27.5 million on 6/15/2016. Construction of the building is completed on 12/15/2018. Hometown Construction expects the building to be completed in two and a half years and uses the Percentage of Completion Method (cost to cost approach) to account for the contract. Cost information related to the contract are as follows:
2016 2017 2018
Actual Construction costs incurred during year 45,00,000 12,075,000 94,25,000
Estimated costs to complete at 12/31 20,500,000 8,925,000 0
a. Determine the amount of Gross Profit that would be recognized each year under Percentage of Completion.
b. What amount of Gross Profit would be recognized in 2017 if the estimated costs to complete were $11
c. What would be the amount of Gross Profit recognized each year if the completed Contract Method were used instead?
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