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percentage of completion based on output measures refer to practice 8 8 assume that 692091

Percentage of Completion Based on Output Measures

Refer to Practice 8 8. Assume that the company employs an output measure to estimate the percentage of completion. In particular, the company measures its progress by the number of trail feet that have been completed. Compute the amount of revenue to be recognized in (1) Year 1, (2) Year 2, and (3) Year 3.

Cost to Cost Method

The company signed an $800,000 contract to build an environmentally friendly access trail to South Willow Lake. The project was expected to take approximately three years. The following information was collected for each year of the project—Year 1, Year 2, and Year 3:

 

Cost

Expected

Support

Additional

Trail Feet

Additional

 

Expended

Additional

Timbers

Support

Constructed

Trail Feet

 

during

Cost to

Laid during

Timbers

during

to Be

 

the Year

Completion

the Year

to Be Laid

the Year

Constructed

Year 1       

$100,000

$450,000

150

850

3,000

15,200

Year 2        

150,000

280,000

300

520

7,500

8,200

Year 3        

250,000

0

500

0

8,000

0

The company uses the percentage of completion method of computing revenue from long term construction contracts. Assume that the company employs the cost to cost method of estimating the percentage of completion. Compute the amount of revenue to be recognized in (1) Year 1, (2) Year 2, and (3) Year 3.

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