Question

On July 1, 2020, Crane Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,900,000. On July 1, Crane 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. Contract costs incurred to date Estimated costs to complete the contract Billings to Gumbel At 12/31/20 $300,000 1,200,000 300,000 At 12/31/21 $1,154,200 835,800 1,120,000 At 12/31/22 $2,088,700 -0- 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 $ % $ N $ A 2021 2021 $ $ 2022 $

Answer 1

2020 Cost incurred to date Estimated cost to complete Total cost to complete $300,000 $1,200,000 $1,500,000 Percentage of completion 20% ($300000 / $1500000] Revenue to recognize for the year Costs incurred during the year Gross Profit (Loss) for the year $380,000 ($1900000 x 20%] $300,000 $80,000 [$380000 - $300000]

2021 Cost incurred to date Estimated cost to complete Total cost to complete $1,154,200 $835,800 $1,990,000 Percentage of completion 58% ($1154200 / $1990000] Total Revenue to recognize till date Revenue recognized till last year Revenue to recognize for the year Costs incurred during the year Gross Profit (Loss) for the year $1,102,000 ($1900000 x 58%] $380,000 (Ref: Revenue till date in 2020] $722,000 ($1102000 - $380000] $854,200 ($1154200 - $300000] -$132,200 [$722000 - $854200]

2022 Cost incurred to date Estimated cost to complete Total cost to complete $2,088,700 $0 $2,088,700 Percentage of completion 100% ($2088700 / $2088700] Total Revenue to recognize till date Revenue recognized till last year Revenue to recognize for the year Costs incurred during the year Gross Profit (Loss) for the year $1,900,000 ($1900000 x 100%] $1,102,000 (Ref: Revenue till date in 2021] $798,000 ($1900000 - $1102000] $934,500 [$2088700 - $1154200] -$136,500 [$798000 - $934500]