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

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 $2012 ?$