Question

Problem 18-11 Your answer is partially correct. Try again. On July 1, 2020, Sunland Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,880,000. On July 1, Sunland estimated that it would take between 2 and 3 years to complete the building. On December 31, 2022, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Gumbel for 2020, 2021, and 2022. At 12/31/20 At 12/31/21 At 12/31/22 Contract costs incurred to date $327,800 $1,233,800 $2,092,700 Estimated costs to complete the contract 1,162,200 756,200 –0– Billings to Gumbel 310,000 1,100,000 1,840,000 (a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2020, 2021, and 2022. (Ignore income taxes.) (If answer is 0, please enter 0. Do not leave any field blank. If an amount should be deducted then enter the amount using either a negative sign prececeding the number e.g. -45 or parenthesis e.g. (45).) 2020 $ $ % $ $ 2021 $ $ $ $ 2022 $ $ $ $ $ (b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2020, 2021, and 2022. (Ignore income taxes.) (If answer is 0, please enter 0. Do not leave any fields blank. If an amount should be deducted then enter the amount using either a negative sign prececeding the number e.g. -45 or parenthesis e.g. (45).) 2021 $ 2022 $ $

Answer 1

Answer is given below

Gross Profit recognised in 2020 Gross Profit recognised in 2021 Gross Profit recognised in 2022 $85,800 $154,000 -$144,500 % of Completion method 2022 $2,092,700 A Cost Incurred YTD Estimated cost to complete as of year end Total Cost % of Completion Cost incurred during the year 2020 $327,800 $1,162,200 $1,490,000 2021 $1,233,800 $756,200 $1,990,000 62.00% $906,000 $2,092,700 B 100.00% A/B $858,900 $327,800 Cost incurred during the year = Total YTD Cost - Cost of previous years 2020 $413,600 2021 $1,165,600 2022 $1,880,000 Revenue Recognised - % of completion Less: Revenue recognised in earlier year Revenue recognised in current period $413,600 $752,000 $1,165,600 $714,400A $413,600 Less: Cost incurred during the year Gross profit (Loss) during the year during the year $325,800 $996.00 $858,900 B -$144,500 A-B $68.00 8.6 $154,000 b) Completed-Contract method 2021 + 2920 2020 $0 2827 2022 -$212,700 5202.700 isa. I Gross profit ($1,880,000-$2,092,700) Under completed contract method Gross profit is recognised on completion of contract in 2022