Oriole Enterprises Ltd. has entered into a contract beginning in February 2023 to build two warehouses for Blue Spruce Structures
Ltd. The contract is a non-cancellable fixed-price contract for $10 million. The following data pertain to the construction period (all
figures in thousands).
Costs for the year
2023
2024
2025
$3,850
4,660
1,155
Estimated costs to complete
4,660
1,225
-0-
Progress billings for the year (non-refundable)
3,480
4,180
2,640
Cash collected for the year
3,200
4,230
2,870
The construction industry has experienced significant expansion, making construction materials and labour more costly than originally
estimated. Oriole finds it extremely difficult to estimate the costs to complete construction and therefore difficult to estimate the
percentage complete. It must account for the construction project using the zero-profit method.