Homework Answers
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| Sanderson Construction | $ million | |||
| Ans to 1 | Calculation of Gross Profit | |||
| Particulars | 2021 | 2022 | 2023 | |
| Contract Price | 400.00 | 400.00 | 400.00 | A |
| Construction Expense during the year | 60.00 | 130.00 | 55.00 | B |
| Estimated Construction Expense to complete | 190.00 | 60.00 | - | C |
| Construction Expense to date | 60.00 | 190.00 | 245.00 | D |
| (Sum total of the cost incurred during the year) | ||||
| Estimated Construction Expense | 250.00 | 250.00 | 245.00 | E=C+D |
| Percentage completed | 24.00% | 76.00% | 100.00% | F=D/E |
| (Cost Incurred to date/Estimated total cost) | ||||
| Construction Revenue to be recognized | 96.00 | 208.00 | 96.00 | G |
| (Contract Price*Percentage complete)- revenue previously recognized | ||||
| Year 2021: 24% completed. Revenue recognized = 24% x $ 400 = $ 96. | ||||
| Year 2022: 76% completed. Revenue recognized = 76% x $ 400 – $ 96 (previously recognized) = $ 208. | ||||
| Year 2023: 100% completed. Revenue recognized = 100% x $ 400 – $ 96- $ 208 (previously recognized) = $ 96. | ||||
| Gross Profit | 36.00 | 78.00 | 41.00 | H=G-B |
| Required 1 | Percentage of completion | |||
| Cost Incurred to date | Estimated total cost | % complete to date | ||
| 2021 | 60.00 | 250.00 | 24.00% | |
| 2022 | 190.00 | 250.00 | 76.00% | |
| 2023 | 245.00 | 245.00 | 100.00% | |
| 2021 | ||||
| To Date | Recognized in Prior Years | Recognized in 2021 | ||
| Construction Revenue | 96.00 | - | 96.00 | |
| Construction Expense | 60.00 | - | 60.00 | |
| Gross Profit | 36.00 | - | 36.00 | |
| 2022 | ||||
| To Date | Recognized in Prior Years | Recognized in 2022 | ||
| Construction Revenue | 304.00 | 96.00 | 208.00 | |
| Construction Expense | 190.00 | 60.00 | 130.00 | |
| Gross Profit | 114.00 | 36.00 | 78.00 | |
| 2023 | ||||
| To Date | Recognized in Prior Years | Recognized in 2022 | ||
| Construction Revenue | 400.00 | 304.00 | 96.00 | |
| Construction Expense | 245.00 | 190.00 | 55.00 | |
| Gross Profit | 155.00 | 114.00 | 41.00 | |
| Answer 2 | Revenue Recognized | Cost to date | Gross Profit (loss) | |
| 2021 | - | 60.00 | (60.00) | |
| 2022 | - | 190.00 | (190.00) | |
| 2023 | 400.00 | 245.00 | 155.00 | |
| Ans to 3 | Calculation of Gross Profit | |||
| Particulars | 2021 | 2022 | ||
| Contract Price | 400.00 | 400.00 | A | |
| Construction Expense during the year | 60.00 | 130.00 | B | |
| Estimated Construction Expense to complete | 190.00 | 190.00 | C | |
| Construction Expense to date | 60.00 | 190.00 | D | |
| (Sum total of the cost incurred during the year) | ||||
| Estimated Construction Expense | 250.00 | 380.00 | E=C+D | |
| Percentage completed | 24.00% | 50.00% | F=D/E | |
| (Cost Incurred to date/Estimated total cost) | ||||
| Construction Revenue to be recognized | 96.00 | 104.00 | G | |
| (Contract Price*Percentage complete)- revenue previously recognized | ||||
| Year 2021: 24% completed. Revenue recognized = 24% x $ 400 = $ 96. | ||||
| Year 2022: 50% completed. Revenue recognized = 60% x $ 400 – $ 96 (previously recognized) = $ 104. | ||||
| Gross Profit | 36.00 | (26.00) | H=G-B | |
| Required 3 | Percentage of completion | |||
| Cost Incurred to date | Estimated total cost | % complete to date | ||
| 2021 | 60.00 | 250.00 | 24.00% | |
| 2022 | 190.00 | 380.00 | 50.00% | |
| 2021 | ||||
| To Date | Recognized in Prior Years | Recognized in 2021 | ||
| Construction Revenue | 96.00 | - | 96.00 | |
| Construction Expense | 60.00 | - | 60.00 | |
| Gross Profit | 36.00 | - | 36.00 | |
| 2022 | ||||
| To Date | Recognized in Prior Years | Recognized in 2022 | ||
| Construction Revenue | 200.00 | 96.00 | 104.00 | |
| Construction Expense | 190.00 | 60.00 | 130.00 | |
| Gross Profit | 10.00 | 36.00 | (26.00) | |
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On June 15, 2021, Sanderson Construction entered into a
long-term construction contract to build a baseball stadium in
Washington, D.C., for $370 million. The expected completion date is
April 1, 2023, just in time for the 2023 baseball season. Costs
incurred and estimated costs to complete at year-end for the life
of the contract are as follows ($ in millions):
2021
2022
2023
Costs incurred during the year
$
70
$
110
$
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Estimated costs
to complete as of...
On June 15, 2021, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $220 million. The expected completion date is April 1, 2023, just in time for the 2023 baseball season Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions): Costs incurred during the year Estimated costs to complete as of December 31 2021 2022 2023 $ 40 $80 $50...
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