Question

Construction began on January 1, 2018. Expected completion date: December 31, 2020 Contract price $108 million. The Completed Contract Method is used to recognize revenue and profit from the contracts. Years Actual costs incurred in each year Estimated remaining costs to complete the project (as of Dec 31) 2018 2019 2020 $40 million $38 million $36 million $60 million $44 million $ 0 What amount of gross profit (loss) would the company recognize in each year from the above contract? Show your work. This is a fairly simple question. Please organize your computation/work neatly. If I cannot read it, I cannot grade it. Clearly indicate the profit (loss) amount for each year in bold blue.

Answer 1

Percentage of Completion Method (Amount in Millions)       

(A) Costs incurred to date	$48	$38	$36
Estimated future costs	$60	$44	$0
B) Estimated total costs	$108	$82	$36
(C) Est. total gross profit($108 - B)	0	$26	$72
(D) Percent Complete (A/B)	44%	46%	100%
Total GP Recognized to Date (C*D)	0	$11.96	$72
Current Yr. Gross Profit Recognized	0	0	$72

Gross Profit to be recognized in each year

2018 = 0 Million

2019 = 0 Million

2020 = $72 Million