Question

Cooper Construction Company had a contract starting April 2015, to construct a $18,000,000 building that is expected to be completed in September 2017, at a total estimated cost of $16,500,000. At the end of 2015, the costs to date were $7,590,000 and the estimated total costs to complete had not changed. The progress billings during 2015 were $3,600,000 and the cash collected during 2015 was 2,400,000. For the year ended December 31, 2015, Cooper would recognize gross profit on the building of:_____________

Answer 1

$690,000

Step-by-step explanation:

Total gross profit on the contract = Total contract value - Total estimated cost = 18,000,000 -16,500,000 = $1,500,000

Total cost in 2015 = 7,590,000

Total % of completion in 2015 = Total cost in 2015 / Total cost of contract

Total % of completion in 2015 = 7,590,000/16,500,000

Total % of completion in 2015 = 0.46

Total % of completion in 2015 = 46%

Gross profit in 2015 = Total gross profit on contract * Total % of completion in 2015

Gross profit in 2015 = 1,500,000 * 46%

Gross profit in 2015 = $690,000