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EXERCISE 18-4 (20-25 minutes)



(a)   Gross profit recognized in:


2004
2005
2006
Contract price

$1,500,000

$1,500,000

$1,500,000
Costs:






Costs to date
$400,000

$935,000

$1,070,000

Estimated costs to         complete


  600,000


  1,000,000


165,000


  1,100,000


                0


  1,070,000
Total estimated profit


500,000


400,000


430,000
Percentage completed to date


         40%*


        85%**


         100%
Total gross profit recognized


200,000


340,000


430,000
Less: Gross profit recognized in previous years



                0



    200,000



      340,000
Gross profit        recognized in current year



$   200,000



$  140,000



$     90,000

**$400,000 ÷ $1,000,000

**$935,000 ÷ $1,100,000



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