Question

Franklin Construction entered into a fixed-price contract to build a freeway-connecting ramp for $22 million. Construction costs incurred in the first year were $12 million and estimated remaining costs to complete at the end of the year were $13 million.How much gross profit or loss will Franklin recognize in the first year if it recognizes revenue over time according to percentage of completion method?

Answer 1

Step-by-step explanation:

year-1

Cotract price 22,000,000

Cost to date (12,000,000)

Further Estimated Cost (1,000,000)

Margin 9,000,000

Stage of Completion on the basis work completion

SOC % 12/13 92.308%

For the year ended Profit & loss

Year-1

Revenue 92.308% 20,307,692

Cost of Sales (12,000,000)

Gross profit 8,307,692