Bower Construction Comp

question 90

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:

Required (Show Calculations):
1.Compute contract costs incurred during 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 completion method of recognizing revenue on long-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:

Tissues Per Box

The count of individual tissue pieces contained within a single box packaging.

Population

The total number of individuals within a specified area or group, often used in statistics and research.

Gasoline Price

Gasoline price is the cost per unit volume of gasoline, typically measured in per liter or per gallon, which can vary based on crude oil prices, refinery costs, taxes, and other factors.

Percentage Increase

The ratio of the increase in an amount to the original amount, expressed as a percentage.