Penner Builders Contracted to Build a High-Rise for $28,000,000

question 31

Essay

Penner Builders contracted to build a high-rise for $28,000,000. Construction began in 2014 and is expected to be completed in 2017. Data for 2014 and 2015 are: Penner uses the percentage-of-completion method.
Instructions
(a) How much gross profit should be reported for 2014? Show your computation.
(b) How much gross profit should be reported for 2015?
(c) Make the journal entry to record the revenue and gross profit for 2015.

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Definitions:

Bankruptcy Costs

Expenses associated with the process of declaring bankruptcy, including legal fees, administrative fees, and any potential loss to creditors.

Market Value

The current price at which an asset or service can be bought or sold in the market, determined by supply and demand dynamics.

EBIT

EBIT stands for Earnings Before Interest and Taxes, a measure of a company's profitability that excludes interest and income tax expenses.

Debt

Money owed by one party, the borrower, to a second party, the lender; it is often represented by loans or bonds.