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| % of completion | Completed Contract | |||||
| Situation | 2021 | 2022 | 2023 | 2021 | 2022 | 2023 |
| 1 | 293057 | 465751 | 251192 | 0 | 0 | 1010000 |
| 2 | 293057 | -13057 | 280000 | 560000 | ||
| 3 | 293057 | -585444 | -297613 | -590000 | ||
| 4 | 170000 | 1410000 | 0 | 1580000 | ||
| 5 | 170000 | -170000 | 380000 | 380000 | ||
| 6 | -22715 | -181575 | -455710 | -660000 |
Working Notes:
| Situation 1 | |||
| 2021 | 2022 | 2023 | |
| Contract Price | 6800000 | 6800000 | 6800000 |
| Actual Costs to date | 1680000 | 4350000 | 5790000 |
| Estimated costs to complete | 4110000 | 1440000 | 0 |
| Total estimated costs | 5790000 | 5790000 | 5790000 |
| Estimated Gross Profit | 1010000 | 1010000 | 1010000 |
| % of Completion | 29.02% | 75.13% | 100.00% |
| Gross Profit | 293057 | 758808 | 1010000 |
| Gross profit Recognised in Previous Year | 0 | 293057 | 758808 |
| Gross profit to be recognised | 293057 | 465751 | 251192 |
| Situation 2 | |||
| 2021 | 2022 | 2023 | |
| Contract Price | 6800000 | 6800000 | 6800000 |
| Actual Costs to date | 1680000 | 3120000 | 6240000 |
| Estimated costs to complete | 4110000 | 3120000 | 0 |
| Total estimated costs | 5790000 | 6240000 | 6240000 |
| Estimated Gross Profit | 1010000 | 560000 | 560000 |
| % of Completion | 29.02% | 50.00% | 100.00% |
| Gross Profit | 293057 | 280000 | 560000 |
| Gross profit Recognised in Previous Year | 0 | 293057 | 280000 |
| Gross profit to be recognised | 293057 | -13057 | 280000 |
| Situation 3 | |||
| 2021 | 2022 | 2023 | |
| Contract Price | 6800000 | 6800000 | 6800000 |
| Actual Costs to date | 1680000 | 4350000 | 7390000 |
| Estimated costs to complete | 4110000 | 2940000 | 0 |
| Total estimated costs | 5790000 | 7290000 | 7390000 |
| Estimated Gross Profit | 1010000 | -490000 | -590000 |
| % of Completion | 29.02% | 59.67% | 100.00% |
| Gross Profit | 293057 | -292387 | -590000 |
| Gross profit Recognised in Previous Year | 0 | 293057 | -292387 |
| Gross profit to be recognised | 293057 | -585444 | -297613 |
| Situation 4 | |||
| 2021 | 2022 | 2023 | |
| Contract Price | 6800000 | 6800000 | 6800000 |
| Actual Costs to date | 680000 | 3860000 | 5220000 |
| Estimated costs to complete | 4760000 | 965000 | 0 |
| Total estimated costs | 5440000 | 4825000 | 5220000 |
| Estimated Gross Profit | 1360000 | 1975000 | 1580000 |
| % of Completion | 12.50% | 80.00% | 100.00% |
| Gross Profit | 170000 | 1580000 | 1580000 |
| Gross profit Recognised in Previous Year | 0 | 170000 | 1580000 |
| Gross profit to be recognised | 170000 | 1410000 | 0 |
| Situation 5 | |||
| 2021 | 2022 | 2023 | |
| Contract Price | 6800000 | 6800000 | 6800000 |
| Actual Costs to date | 680000 | 3860000 | 6420000 |
| Estimated costs to complete | 4760000 | 2940000 | 0 |
| Total estimated costs | 5440000 | 6800000 | 6420000 |
| Estimated Gross Profit | 1360000 | 0 | 380000 |
| % of Completion | 12.50% | 56.76% | 100.00% |
| Gross Profit | 170000 | 0 | 380000 |
| Gross profit Recognised in Previous Year | 0 | 170000 | 0 |
| Gross profit to be recognised | 170000 | -170000 | 380000 |
| Situation 6 | |||
| 2021 | 2022 | 2023 | |
| Contract Price | 6800000 | 6800000 | 6800000 |
| Actual Costs to date | 680000 | 3860000 | 7460000 |
| Estimated costs to complete | 6355000 | 3320000 | 0 |
| Total estimated costs | 7035000 | 7180000 | 7460000 |
| Estimated Gross Profit | -235000 | -380000 | -660000 |
| % of Completion | 9.67% | 53.76% | 100.00% |
| Gross Profit | -22715 | -204290 | -660000 |
| Gross profit Recognised in Previous Year | 0 | -22715 | -204290 |
| Gross profit to be recognised | -22715 | -181575 | -455710 |
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Exercise 6-23 (Static) Income (loss) recognition; Long-term
contract; revenue recognition over time vs. upon project completion
[LO6-9] Brady Construction Company contracted to build an apartment
complex for a price of $5,000,000. Construction began in 2021 and
was completed in 2023. The following is a series of independent
situations, numbered 1 through 6, involving differing costs for the
project. All costs are stated in thousands of dollars.
Situation 1 2 3 4 Costs Incurred During Year 2021 2022 2023 1,500 2,100...
Exercise 5-21 Income (loss) recognition; Long-term contract; revenue recognition over time vs. upon project completion [LO5-9] Brady Construction Company contracted to build an apartment complex for a price of $6,200,000. Construction began in 2018 and was completed in 2020. The following is a series of independent situations, numbered 1 through 6, involving differing costs for the project. All costs are stated in thousands of dollars Estimated Costs to Complete (As of the End of the Year) Costs Incurred During Year...
Exercise 6-20 (Algo) Long-term contract; revenue recognition over time vs. upon project completion [LO6-9] On June 15, 2021, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $390 million. The expected completion date is April 1, 2023, just in time for the 2023 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions): Costs incurred during the year Estimated...
Exercise 6-21 (Algo) Long-term contract; revenue recognition over time; loss projected on entire project [LO6-9] On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,300,000. During 2021, costs of $2,100,000 were incurred with estimated costs of $4,100,000 yet to be incurred. Billings of $2,600,000 were sent, and cash collected was $2,350,000. In 2022, costs incurred were $2,600,000 with remaining costs estimated to be $3,750,000. 2022 billings were $2,850,000...
Exercise 5-21 Income (loss) recognition; Long-term contract; revenue recognition over time vs. upon project completion (LO5-9) Brady Construction Company contracted to build an apartment complex for a price of $6,300,000. Construction began in 2018 and was completed in 2020. The following is a series of independent situations, numbered 1 through 6, involving differing costs for the project. All costs are stated in thousands of dollars. Costs Incurred During Year Situation 2018 2019 2020 1 1,630 2,520 1,290 2 1,630 1,290...
Exercise 5-21 Income (loss) recognition; Long-term contract; revenue recognition over time vs. upon project completion (LO5-9) Brady Construction Company contracted to build an apartment complex for a price of $6,300,000. Construction began in 2018 and was completed in 2020. The following is a series of independent situations, numbered 1 through 6, involving differing costs for the project. All costs are stated in thousands of dollars. Costs incurred During Year Situation 2018 2019 2020 1 1,630 2,520 1,290 2 1630 1,290...
5-HW O Exercise 5-21 Income (loss) recognition; Long-term contract; revenue recognition over time vs. upon project completion (LO5-9) Brady Construction Company contracted to build an apartment complex for a price of $6,300,000. Construction began in 2018 and was completed in 2020. The following is a series of independent situations, numbered 1 through 6, involving differing costs for the project. All costs are stated in thousands of dollars. Year Estimated costs to Complete Costs incurred During (As of the End of...
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