Question

XYZ Corp recorded the following Journal Entry in 2019:

CIP 58,500

Construction Expenses 74,700

Revenue 133,200

The project is 80% complete as of December 31st, 2019. The project was 35% complete as of December 31st, 2018. XYZ currently believes the project's lifetime gross profit will equal $137,000.

What did XYZ think the lifetime gross profit would be as of December 31st, 2018?

Answer 1

Particulars	Amount in $
Revenue for 2019	$    1,33,200
Increase in POCM for the year 2019 (i.e. from 35% to 80%)	45%
Total Revenue for the contract	$    2,96,000
Less-: Life time Gross Profit (as given)	$    1,37,000
Total Construction Expenses for the contract	$    1,59,000
Revenue	$    2,96,000
Revenue for 2018 by applying POCM@35%	$    1,03,600
Construction Expenses@35% (1,59,000 X 35%)	$       55,650
Gross Profit for 2018	$       47,950

Life time gross profit for the year 2018 will be $47,950.