Creation Construction Company (CCC)has Contracted to Build an Office Building

question 7

Essay

Creation Construction Company (CCC)has contracted to build an office building for Property Corp.The construction started on January 1,2018,and the project was completed on July 1,2021.The contract price was $70 million.Due to uncertainties in the construction process,the two parties to the project agreed to a risk-sharing arrangement whereby Property Corp.covers 50% of all cost overruns in excess of the originally estimated cost of $65 million (e.g. ,if estimated total costs are $69 million,then CCC would receive an additional $2 million for the contract).The following data relate to the construction period.

Required:
Calculate the estimated gross profit (loss)for 2018,2019,2020,and 2021,assuming that the percentage of completion method is used.

---

Definitions:

Dam

A barrier constructed to hold back water and raise its level, forming a reservoir used to generate electricity or as a water supply.

Fractured Rocks

Rocks that have been broken or cracked due to various geological processes, often creating pathways for fluid movement.

Permeable Rocks

Rocks that allow water to pass through them due to having void spaces or pores.

Geothermal Energy

Energy that can be extracted from Earth’s internal heat.