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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?

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Answer:

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  

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