Question

On March 1, 2017, Bonita Construction Company contracted to construct a factory building for Fabrik Manufacturing Inc. for a total contract price of $8,450,000. The building was completed by October 31, 2019. The annual contract costs incurred, estimated costs to complete the contract, and accumulated billings to Fabrik for 2017, 2018, and 2019 are given below: 2017 2018 2019 Contract costs incurred during the year $2,824,800 $2,086,300 $2,418,900 Estimated costs to complete the contract at 12/31 3,595,200 2,418,900 –0– Billings to Fabrik during the year 3,230,000 3,510,000 1,710,000 (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, 2017, 2018, and 2019. (Ignore income taxes.) (If answer is 0, please enter 0. Do not leave any fields blank.) (b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2017, 2018, and 2019. (Ignore income taxes.) (If answer is 0, please enter 0. Do not leave any fields blank. Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Answer 1

Part 1

	2017	2018	2019
Revenue recognized	3718000	1943500	2788500
Gross profit (loss)	893200	(142800)	369600

	2017	2018	2019
Contract price	8,450,000	8,450,000	8,450,000
Actual costs to date	2824800	4911100 (2824800+2086300)	7330000 (4911100+2418900)
Estimated costs to complete	3595200	2418900	0
Total estimated costs	6420000	7330000	7330000

Revenue Recognition:

2017 = 2824800/6420000 =44%*8450000 = 3718000

2018 = 4911100/7330000 = (67%*8450000)-3718000 = 1943500

2019 =8450000-3718000-1943500 =2788500

Gross profit (loss) recognition:

2018 = 3718000-2824800 = 893200

2019=1943500-2086300 = (142800)

2020= 2788500-2418900 = 369600

Part 2

	2017	2018	2019
Revenue recognized	0	0	8450000
Gross profit (loss)	0	0	1120000