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Magnolia Construction [MBH] began work in 2014 under a two-year contract which was to pay them...

Magnolia Construction [MBH] began work in 2014 under a two-year contract which was to pay them $345,000,000. In 2014, MBH spent $135,000,000 on construction and estimated the project would require another $90,000,000 to complete. In 2015, MBH spent $120,000,000 on construction. The amount gross profit to record in 2015 was:

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Answer #1

The amount gross profit to record in 2015 was: $153,000,000

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2014 2015
A Contract Price $ 345,000,000 $ 345,000,000
B Cost Incurred to Date $ 135,000,000 $ 120,000,000
C Estimated cost yet to be incurred to complete the contract $ 90,000,000 $ 0
D = B+C Total Cost $ 225,000,000 $ 120,000,000
E = (D/B) x 100 % of Completion 60% 100%
F = A x E Revenue to date $ 207,000,000 $ 345,000,000
G Revenue of Previous year $ 0 $ 207,000,000
H = F - G Net Revenue this year $ 207,000,000 $ 138,000,000
I Cost to date $ 135,000,000 $ 120,000,000
J Cost to date of previous year $ 0 $ 135,000,000
K = I - J Net Cost for the year $ 135,000,000 -$ 15,000,000
L = H - K Gross Profits $ 72,000,000 $ 153,000,000
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