Percentage-of-Completion Method with Change Orders
The Build-It Construction Company enters into a contract on January 1, 2008, to construct a 20-story office building for $42,000,000. During the construction period, many change orders are made to the original contract. The following schedule summarizes the changes made in 2008.
Cost Incurred—
Â
Estimated
2008
Cost to Complete
Contract Price
Basic contract                     Â
$8,000,000
$28,000,000
$42,000,000
Change Order 1Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â
50,000
125,000
Change Order 2Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â
0
Change Order 3Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â
300,000
Still to be negotiated;
at least cost
Change Order 4Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â
100,000
Compute the revenues, costs, and gross profit to be recognized in 2008, assuming use of the cost-to-cost method to determine the percentage completed. (Round percentage to two decimal places.)