Question

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 $432,000 168,000 547,000 497,000 902,000 902,000 (a) Using the percentage of completion method, compute the estimated gross profit that would be recognized during each year of the construction period. (If answer is o, please enter 0. Do not leave any fields blank.) Gross profit recognized in 2017 Gross profit recognized in 2018 Gross profit recognized in 2019 (b) Using the completed-contract method, compute the estimated gross profit that would any fields blank.) recognised during each year of the construction period. (If answer iso, please enter 0. Do not leave Gross profit recognized in 2017 Gross profit recognized in 2018 Gross profit recognized in 2019

Answer 1

Answers

• Requirement [a]

	2017	2018	2019
Gross Profits (Loss)	$           147,980.00	$             69,460.00	$                76,560.00

--Working

Working		2017	2018	2019
A	Contract Price	$           902,000.00	$          902,000.00	$              902,000.00
B	Cost Incurred to Date	$           294,000.00	$          432,000.00	$              608,000.00
C	Estimated cost yet to be incurred to complete the contract	$           306,000.00	$          168,000.00	$                                -
D = B+C	Total Cost	$           600,000.00	$          600,000.00	$              608,000.00
E = (B/D) x 100	% of Completion	49.00%	72.00%	100.00%
F = A x E	Revenue to date	$           441,980.00	$          649,440.00	$              902,000.00
G	Revenue of Previous year	$                            -	$          441,980.00	$              649,440.00
H = F - G	Net Revenue this year	$           441,980.00	$          207,460.00	$              252,560.00
I (=B)	Cost to date	$           294,000.00	$          432,000.00	$              608,000.00
J	Cost to date of previous year	$                            -	$          294,000.00	$              432,000.00
K = I - J	Net Cost for the year	$           294,000.00	$          138,000.00	$              176,000.00
L = H - K	Gross Profits	$           147,980.00	$             69,460.00	$                76,560.00

• Requirement [b]

Gross Profit recognised in:
2017 = $ 0
2018 = $ 0
2019 = 902000 – 608000 = $ 294,000