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Bonita Construction Company has entered into a contract beginning January 1, 2020, to build a parking complex. It has been es

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Answer #1

(a)

     2020   

     2021   

     2022   

Contract price

$902,000

$902,000

$902,000

Less estimated cost:

       Costs to date

256,280

429,120

606,000

       Estimated cost to complete

339,720

166,880

      —         

       Estimated total cost

596,000

596,000

606,000

          Estimated total gross profit

$306,000

$306,000

$296,000

          Gross profit recognized in—

2020:

$256,280

× $306,000 =

$131,580

$596,000

2021:

$429,120

× $306,000 =

$220,320

$596,000

Less 2020 recognized gross profit

131,580

Gross profit in 2021

$ 88,740

2022:

Less 2020–2021 recognized gross profit

220,320

Gross profit in 2022

$75,680

(b)      In 2020 and 2021, no gross profit would be recognized.

          Total billings..........................................................              $902,000

          Total cost...............................................................              (606,000)

Gross profit recognized in 2022………………..              $296,000

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