Bower Construction Comp Required (Show Calculations):
1 $s$

question 15

Essay

Bower Construction Comp. has consistently used the percentage-of-completion method for recognizing revenue on its long-term contracts. During 2010 Bower entered into a fixed-price contract to construct an office building for $8,000,000. Information relating to the contract is as follows:
$\begin{array}{llll}& \underline{2010} & \underline{2011}& \underline{2012}\\\text { Percent Complete } &25 \%&70\%&100 \%\\\text { Estimated Total Cost at Completion } & \$ 5,600,000 & \$ 6,400,000 & \$ 6,500,000 \\\text { GrossProfit Recognized to date } & 600,000 & 1,120,000 & ?\end{array}$ Required (Show Calculations):
1. Compute contract cost $s$ incurre d duing 2010,2011 and 2012 .
2. Determine how much gross profit Bower should recognize in 2012.
3. Under what conditions would it not be reasonable for a company to use the percentage of completionmethod of recogizing revenue onlong-term contracts?
4. If Bower had used the completed contract method of accounting for this long-term contract how much gross profit would it have earned in 2010,2011 and $2012 ?$

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.