On March 1, 2012, Chance Company entered into a contract to build an apartment building. It
is estimated that the building will cost $ 2,000,000 and will take 3 years to complete. The contract
price was $ 3,000,000. The following information pertains to the construction period.
2012 2013 2014
Cost to date $ 600,000 $ 1,560,000 $ 2,100,000
Estimated costs to complete 1,400,000 520,000 -0-
Progress billings to date 1,050,000 2,000,000 3,000,000
Cash collected to date 950,000 1,950,000 2,850,000
Instruction:
Assuming the percentage-of-completion method is used.
a) Compute the amount of gross profit to be recognized each year,
b) Show how the details related to the construction contract would be disclosed
on income statement and the balance sheet at the end each year.