Waterway Construction Company has entered into a contract beginning January 1, 2020, to build a parking complex. It has been estimated that the complex will cost $598,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $897,000. The following data pertain to the construction period.
2020 2021 2022
Costs to date $275,080 $412,620 $607,000
Estimated costs to complete 322,920 185,380 –0–
Progress billings to date 272,000 545,000 897,000
Cash collected to date 242,000 495,000 897,000
(a) Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period. (If answer is 0, please enter 0. Do not leave any fields blank.)
Gross profit recognized in 2020
Gross profit recognized in 2021
Gross profit recognized in 2022
(b) Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period. (If answer is 0, please enter 0. Do not leave any fields blank.)
Gross profit recognized in 2020
Gross profit recognized in 2021
Gross profit recognized in 2022
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Waterway Construction Company | ||||
Ans to a | ||||
Particulars | 2020 | 2021 | 2022 | Note |
Contract Price | 897,000 | 897,000 | 897,000 | A |
Cost Incurred during the year | 275,080 | 137,540 | 194,380 | B |
Estimated cost to complete | 322,920 | 185,380 | - | C |
Cost Incurred to date | 275,080 | 412,620 | 607,000 | D |
(Sum total of the cost incurred during the year) | ||||
Estimated total cost | 598,000 | 598,000 | 607,000 | E=C+D |
Percentage complete | 46.00% | 69.00% | 100.00% | F=D/E |
(Cost Incurred to date/Estimated total cost) | ||||
Revenue to be recognized | 412,620 | 206,310 | 278,070 | G |
(Contract Price*Percentage complete)- revenue previously recognized |
Year 2020: 46% completed. Revenue recognized = 46% x $ 897,000 = $ 412,620. |
Year 2021: 69% completed. Revenue recognized = 69% x $ 897,000 – $ 412,620 (previously recognized) = $ 206,310. |
Year 2022: 100% completed. Revenue recognized = 100% x $ 897,000 – $ 412,620- $ 206,310 (previously recognized) = $ 278,070. |
Gross Profit/(Loss) | 137,540 | 68,770 | 83,690 | H=G-B |
Ans to b | ||||
Particulars | 2020 | 2021 | 2022 | Note |
Contract Price | 897,000 | 897,000 | 897,000 | A |
Cost Incurred during the year | 275,080 | 137,540 | 194,380 | B |
Cost Incurred to date | 275,080 | 412,620 | 607,000 | D |
Revenue to be recognized | - | - | 897,000 | G |
Gross Profit/(Loss) | - | - | 290,000 | H=G-D |
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