Question

Problem 18-10 On March 1, 2017, Culver 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: 2019 $1,962,900 Contract costs incurred during the year Estimated costs to complete the contract at 12/31 Billings to Fabrik during the year 2017 $3,052,800 3,307,200 3,230,000 2018 $2,254,300 1,962,900 3,470,000 -0- 1,750,000 (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.) 2017

Answer 1

Answer :

Given data is :

Total contract price = $ 8,450,000

a)From the given data :

Particulars	2017	2018	2019
Cost in present year	3,052,800	2,254,300	1,962,900
Total cost	3,052,800	= 3,052,800 + 2,254,300 = 5,307,100	= 5,307,100 + 1,962,900 = 7,270,000
Estimated cost	3,307,200	1,962,900	0
Total estimated cost	6,360,000	= 5,307,100 + 1,962,900 = 7,270,000	7,270,000
Percentage of completion = (cost incurred till date(Total cost) / total estimated cost)	= 3,052,800 / 6,360,000 = 0.48 = 48%	= 5,307,100 / 7,270,000 = 0.73 = 73%	= 7,270,000 / 7,270,000 = 1 = 100%
Total revenue	$ 8,450,000	$ 8,450,000	$ 8,450,000
Recognized revenue total	=8,450,000 * 48% = 4,056,000	= 8,450,000 * 73% = 6,168,500	= 8,450,000 * 1 = 8,450,000
Recognized revenue in past year	0	4,056,000	6,168,500
Recognized revenue in present year	4,056,000	= 6,168,500 - 4,056,000 = 2,112,500	2,281,500

b)Using completed contract method :

Particulars	2017	2018	2019
Revenue in present year	4,056,000	2,112,500	2,281,500
Total cost in present year	3,052,800	2,254,300	1,962,900
Gross Profit	= 4,056,000 - 3,052,800 = 1,003,200	= 2,112,50- 2,254,300 = - 141,800	= 2,281,500 - 1,962,900 = 318,600