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Unformatted text preview: r has incurred 25% (300000/1200000) of all costs expected to be incurred on the project .
if the percentage of completion method being used the contractor will recognize 25% of the profit that will be earned on the project
the total profit is expected to be $800000 ($2000000$1200000) and $200000 (25%*800000) of profit should be recognized in the first
year
2)at the end of the second year . the company has incurred total cost of $900000 ($300000 in the first year and $600000 in the second
year ) given that an additional $600000 of cost is expected to be incurred in the future the total cost of the project is expected to be
$1500000($900000+$600000) and the new estimate of total profit is $ 500000($2000000contract price $1500000of costs)
if the project is 60% complete after year 2 ($900000$1500000) 60%of all profit should be recognized by the end of year 2
or $300000(60%*$500000) because $200000 was recognized in the first year .$100000 remains to be recognized in year 2
3) at the end of the third year .total cost s a...
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 Winter '13

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