Franklin Construction entered into a fixedprice contract to

Franklin Construction entered into a fixed-price contract to build a freeway-connecting ramp for $54 million. Construction costs incurred in the first year were $44 million and estimated remaining costs to complete at the end of the year were $27 million.

How much gross profit or loss will Franklin recognize in the first year if it recognizes revenue over time according to the percentage of completion method? (Enter your answer in millions.)

gross loss : ?

Solution

Solution:

Gross loss = Total estimated loss x % of completion

= ($71 - $54) x $44/ $71

= $17 x$44/$71

=$10.535m