Prairie Ridge Construction Ltd. entered into a fixed-price c…
Prairie Ridge Construction Ltd. entered into a fixed-price contract at the beginning of 2025 to construct a custom manufacturing plant. The contract price was $2,400,000 and total construction costs were originally estimated at $1,920,000. During 2025, the company incurred $600,000 of construction costs and issued progress billings of $540,000. Revenue is recognized using the percentage of completion method. Early in 2026, rising costs caused the total estimated contract cost to increase to $2,200,000.