Accounting 305 Chapters 2 & 3 Homework Hometown Construction Corp. entered into a long-term contract to...
Accounting 305
Chapters 2 & 3 Homework
- Hometown Construction Corp. entered into a long-term contract to build an office building for Outsider Corp. at a fixed contract price of $27.5 million on 6/15/2016. Construction of the building is completed on 12/15/2018. Hometown Construction expects the building to be completed in two and a half years and uses the Percentage of Completion Method (cost to cost approach) to account for the contract. Cost information related to the contract are as follows:
|
2016 |
2017 |
2018 |
|
|
Actual Construction costs incurred during year |
4,500,000 |
12,075,000 |
9,425,000 |
|
Estimated costs to complete at 12/31 |
20,500,000 |
8,925,000 |
0 |
A. Determine the amount of Gross Profit that would be recognized each year under Percentage of Completion.
B. What amount of Gross Profit would be recognized in 2017 if the estimated costs to complete were $11,000,000?
C. What would be the amount of Gross Profit recognized each year if the completed Contract Method were used instead?
Homework Answers
| A.) | % Completion of 2016 | 18.00% | =4500000/(4500000+20500000) |
| Revenue to be recognized in 2016 | 4,950,000 | =27500000*18% | |
| Less: Cost incurred in 2016 | 4,500,000 | ||
| Gross profit of 2016 | $ 450,000 | ||
| % Completion of 2017 | 65.00% | =(4500000+12075000)/(4500000+12075000+8925000) | |
| Cumulative revenue at end of 2017 | 17,875,000 | =27500000*65% | |
| Less: Revenue recognized in 2016 | 4,950,000 | ||
| Revenue to be recognized in 2017 | 12,925,000 | ||
| Gross profit of 2017 | $ 850,000 | =12925000-12075000 | |
| Revenue to be recognized in 2018 | 9,625,000 | =27500000-4950000-12925000 | |
| Less: Cost Incurred in 2018 | 9,425,000 | ||
| Gross profit of 2018 | $ 200,000 | ||
| B.) | % Completion of 2017 | 60.11% | =(4500000+12075000)/(4500000+12075000+11000000) |
| Cumulative revenue at end of 2017 | 16,530,250 | =27500000*60.11% | |
| Less: Revenue recognized in 2016 | 4,950,000 | ||
| Revenue to be recognized in 2017 | 11,580,250 | ||
| Gross profit(loss) of 2017 | - $494,750 | =11580250-12075000 | |
| C.) | Gross profit of 2016 | $ 0 | |
| Gross profit of 2017 | $ 0 | ||
| Gross profit of 2018 | $ 1,500,000 | ||
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Accounting 305
Chapters 2 & 3 Homework
Hometown Construction Corp. entered into a long-term contract
to...
1.Hometown Construction Corp. entered into a long-term contract to build an office building for Outsider Corp....
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Cheyenne Construction Company has entered into a contract
beginning January 1, 2017, to build a parking complex. It has been
estimated that the complex will cost $596,000 and will take 3 years
to construct. The complex will be billed to the purchasing company
at $895,000. The following data pertain to the construction
period.
2017
2018
2019
Costs to date
$268,200
$482,760
$605,000
Estimated costs to
complete
327,800
113,240
–0–
Progress billings to
date
267,000
552,000
895,000
Cash collected to date...
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Swifty Construction Company has entered into a contract beginning January 1, 2017, to build a parking...
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1.Hometown Construction Corp. entered into a long-term contract to build an office building for Outsider Corp. at a fixed contract price of $27.5 million on 6/15/2016. Construction of the building is completed on 12/15/2018. Hometown Construction expects the building to be completed in two and a half years and uses the Percentage of Completion Method (cost to cost approach) to account for the contract. Cost information related to the contract are as follows: 2016 2017 2018 Actual Construction costs incurred...
On June 15, 2018, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $360 million. The expected completion date is April 1, 2020, just in time for the 2020 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions): 2018 2019 2020 Costs incurred during the year Estimated costs to complete as of December 31 S 30 140 $40...
Shanahan Construction Company has entered into a contract beginning January 1, 2017, to build a parking complex. It is estimated that the complex will take 3 years to construct. Additional information follows. Estimated cost of complex Contract price AA 600,000 900,000 The following data pertain to the construction period. 2019 610,000 $ 6100 A 2017 270,000 330,000 270,000 240,000 2018 450,000 150,000 550,000 500,000 Costs to date Estimated costs to complete Progress billings to date Cash collected to date $...
On June 15, 2018, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $390 million. The expected completion date is April 1, 2020. lust in time for the 2020 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions): Costs incurred during the year Estimated costs to complete as of December 31 2018 2019 2020 $ 60 $130 $70...
In 2016, Pioneer Construction Company entered into a contract to construct a road for Denton County for S10,000,000. The road was completed in 2018. Information related to the contract is as follows: 2017 $2,610,000 S3,162,000 $2,230,800 2,028,000 2,100,000 3,672,000 4,228,000 1,850,000 3,000,000 5,150,000 2016 2018 Cost incurred during the year Estimated costs to complete as of year-end Billings during the year 6,390,000 0 Cash collections during the year Pioneer recognizes revenue over time according to percentage of completion. Calculate the...
Cheyenne Construction Company has entered into a contract
beginning January 1, 2017, to build a parking complex. It has been
estimated that the complex will cost $596,000 and will take 3 years
to construct. The complex will be billed to the purchasing company
at $895,000. The following data pertain to the construction
period.
2017
2018
2019
Costs to date
$268,200
$482,760
$605,000
Estimated costs to
complete
327,800
113,240
–0–
Progress billings to
date
267,000
552,000
895,000
Cash collected to date...
Ayayai Construction Company has entered into a contract beginning January 1, 2017, to build a parking complex. It has been estimated that the complex will cost $600,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $901,000. The following data pertain to the construction period. Costs to date Estimated costs to complete Progress billings to date Cash collected to date 2017 $246,000 354,000 270,000 240,000 2018 $432,000 168,000 546,000 496,000 2019 $612,000...
Sheffield Construction Company has entered into a contract beginning January 1, 2012, to build a parking complex. It has been estimated that the complex will cost $600,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $902,000. The following data pertain to the construction period. 2019 $608,000 Costs to date Estimated costs to complete Progress billings to date Cash collected to date 2017 $294,000 306,000 268,000 238,000 2018 $432,000 168,000 547,000 497,000...
Swifty Construction Company has entered into a contract beginning January 1, 2017, to build a parking complex. It has been estimated that the complex will cost $606,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $896,000. The following data pertain to the construction period. 2019 Costs to date Estimated costs to complete Progress billings to date Cash collected to date 2017 $266,640 339,360 270,000 240,000 2018 $412,080 193,920 545,000 495,000 $617,000...
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