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Gomez, Inc. began work in 2010 on contract #3814, which provided for a contract price of...

Gomez, Inc. began work in 2010 on contract #3814, which provided for a contract price of $7,200,000. Other details follow: 2010 2011 Costs incurred during the year $1,200,000 $3,675,000 Estimated costs to complete, as of December 31 3,600,000 0 Billings during the year 1,350,000 5,400,000 Collections during the year 900,000 5,850,000

14. Assume that Gomez uses the percentage-of-completion method of accounting. The portion of the total gross profit to be recognized as income in 2010 is a. $450,000. b. $600,000. c. $1,800,000. d. $2,400,000. 1

5. Assume that Gomez uses the completed-contract method of accounting. The portion of the total gross profit to be recognized as income in 2011 is a. $900,000. b. $1,350,000. c. $2,325,000. d. $7,200,000.

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Answer #1

Q14 ) The correct answer is option B i.e. $ 6,00,000

2010
Contract Price 72,00,000
Less: Estimated Cost till date 12,00,000
Less :Estimated Cost for Completetion 36,00,000
Estimated Total Costs 48,00,000
Estimated Gross Profit 24,00,000
Percentage of Completetion 25.00%
Revenue Recognized earlier
Total Revenue Recognized     6,00,000
Gross Profit Recognized for the year    6,00,000

Q15) The correct answer is option C i.e. $ 2,325,000.

Contract Price 72,00,000
Less: Estimated Cost to date
2010 12,00,000
2011 36,75,000 48,75,000
Gross Profit 23,25,000
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