Question

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		237,000		502,000		895,000

(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 0, 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 be recognized during each year of the construction period. (If answer is 0, please enter 0. Do not leave any fields blank.)

Gross profit recognized in 2017		$
Gross profit recognized in 2018		$
Gross profit recognized in 2019		$

Answer 1

Revenue recognition as per Percentage of Completion Method - Cheyenne Cosntruction Company
Year	Actual cost incurred (A)	Total cost incurred till date (B)	Total estimated Cost ( C )	% of completion (D= B/C)	Contract Price (E )	Total Revenue to be recoganized (F=E * D)	Revenue for current period (G)	Gross Profit (H=G-A)
									2017	$268,200	$268,200	$596,000	45.00%	$895,000	$402,750	$402,750	$134,550
			(268200+327800)
2018	$214,560	$482,760	$596,000	81.00%	$895,000	$724,950	$322,200	$107,640
			(482760+113240)				(724950-402750)
2019	$122,240	$605,000	$605,000	100.00%	$895,000	$895,000	170050	$47,810
							(895000-724950)

Revenue recognition as per Completed Contract method
Year	Actual cost incurred (A)	Total cost incurred till date (B)	Total estimated Cost ( C )	Contract Price	Gross Profit
				(D)
2017	$268,200	$268,200	$596,000	$895,000	$0
2018	$214,560	$482,760	$596,000	$895,000	$0
2019	$122,240	$605,000	$605,000	$895,000	$290,000.00