Question

The contract price for a 3-year construction contract is $100 The actual cost and estimated costs for each vear are given below: Items 2016 2017 2018 Actual cost incurred each year $10 Estimated cost to complete $40 Under Percentage of Completion method (You first prepare the table I showed you in the class to make your calculations easier) S20 $30 1. Compute Actual cost incurred to date 2. Compute total estimated cost for each year 3. Compute estimated gross profit to date for each year (actual in 2018) 4. Compute the percentage of completion to date (cumulative) 5. How much revenue to be recognized each year 6. How much gross profit to be recognized each year Under Percentage of Completion method: 1. How much revenue recognized for each year 2. How much gross profit to be recognized each year

Answer 1

Computation of Percentage of cost of Completion
	2016	2017	2018
Cost incurred in Previous Year	$0	$10	$30
Cost incurred during the year	$10	$20	$80
Total Cost Incurred till date	$10	$30	$110
Estmiated cost to Complete at end of of year	$40	$30	$0
Total Estimated Cost of Completion	$50	$60	$0
% of Cost of Completion	20%	50%	100%
( Cost incurred as on /Total cost of Completion)

Statement showing Revenue recogniztion for each year
	2016	2017	2018
Contract Price	$100.00
% of Cost of Completion	20%	50%	100%
Revenue recognised to be recognized as on (a)	$20	$50	$100
Revenue recognized in previous year (b)	$0	$20	$50
Revenue recognized in Current year (a-b)	$20	$30	$50

1. Actual Cost Incurred :$110

2. Estimated Cost for each year

2016: $50

2017: $$60

2018: $0

3&6. Statement showing Gross Profit for each year
	2016	2017	2018	Total
Revenue recognized in Current year	$20	$30	$50	$100
Cost Incurred in Current Year	$10	$20	$80	$110
Gross Profit	$10	$10	-$30	-$10

4. As shown above:-

5: As shown Above