Question

Question 3:

Percentage of Completion Method (12 marks) On January 1, 2017, Eagle Construction Ltd. started a construction project for $4,500,000. Relevant data for 2017 and 2018 are as follows:

                                            2017                                    2018

Current year construction costs                                       $3,300,000                             $ 620,000

Estimated remaining costs to complete                              600,000                                   -0-

Current year billings                                                            3,100,000                              1,400,000

Current year collections                                                    3,000,000                                1,500,000

Required: Calculate the following amounts for each method:

              Completed Percentage-of Contract Completion                                   2017      2018    2017    2018

a) Gross Profit                                                                                              $             $           $           $

b) Construction in progress year-end balance                                       $           $            $           $

c) Costs in excess of billings (Billings in excess of costs)                       $           $            $           $

Answer 1

Schedule showing gross profit (loss) under percentage-of-completion method:
	2017	2018
Particulars	Amount ($)	Amount ($)
Contract revenue	4,500,000.00	4,500,000.00
Costs incurred	3,300,000.00	620,000.00
Estimated costs to complete	600,000.00
Billings	3,100,000.00	1,400,000.00
Cash collections	3,000,000.00	1,500,000.00
Percentage of completion = Costs incurred/(Costs incurred+Estimated costs)	3300000/(3300000+600000)	-
Percentage of completion	85%	100%
Percentage of contract revenue to be recognised	85%	100%
Contract revenue recognised	3,807,692.31	692,307.69
Less: Contract costs
Costs incurred	3,300,000.00	620,000.00
Total costs	3,300,000.00	620,000.00
Profit on contract	507,692.31	72,307.69
Construction in progress = Costs +Profit	3300000+507692	-
	3,807,692.31	-
Costs in excess of billings = Costs - Billings	3300000-3100000	3300000+620000-3100000-1400000
	200,000.00	580,000.00