Percentage Completion Method Example

It is important to visually grasp the percentage completion method for full understanding. The following is a percentage of completion method example to help explain how the method works within a company. Bob is a project accountant for Whistle-at-You Construction Co. Because he is the primary project accountant for his company, this brings with it multiple additional responsibilities. He is responsible for all transactions and yearly revenue for a new tower project that is estimated to take 5 years to complete. Costs and revenues will be recorded at an accrual basis during this 5 year window of production. Whistle-at-You Construction uses the percentage of completion method of revenue recognition for all projects that will take over a year to complete. Bob has obtained and would account for the following information concerning the project over the five year period as follows:

General Information:

Estimated Project Cost = $500 million
Total Project Revenue = $750 million

Year 1:

Cost = $80 million
Percentage Complete = 16%
Revenue = $120 million
Income = $40 million

Year 2:

Cost = $100 million
Percentage Complete = 20%
Revenue = $150 million
Income = $50 million

Year 3:

Cost = $110 million
Percentage Complete = 22%
Revenue = $165 million
Income = $55 million

Year 4:

Cost = $90 million
Percentage Complete = 18%
Revenue = $135 million
Income = $45 million

Year 5:

Cost = $120 million
Percentage Complete = 24%
Revenue = $180 million
Income = $60 million

See Also: Percentage Completion (POC) Method