PROBLEM 18-2

PROBLEM 18-2

(a)		2004	2005	2006
	Contract price	$900,000	$900,000	$900,000
	Less estimated cost:
	Cost to date	270,000	420,000	600,000
	Estimated cost to complete	330,000	180,000	—
	Estimated total cost	600,000	600,000	600,000
	Estimated total gross profit	$300,000	$300,000	$300,000

        Gross profit recognized in—

2004:	$270,000	X $300,000 =	$135,000
	$600,000
2005:	$420,000	X $300,000 =		$210,000
	$600,000
	Less 2004 recognized gross     profit			135,000
	Gross profit in 2005			$  75,000
2006:	Less 2004–2005 recognized     gross profit				210,000
	Gross profit in 2006				$  90,000

(b)   In 2004 and 2005, no gross profit would be recognized.

        Total billings                                        $900,000

        Total cost                                               600,000

        Gross profit recognized in 2006      $300,000