Question

During 2017 Nilsen company started a construction job with a contract price of $2,400,000. The job was completed in 2019. the following information was available 2017 2018 2019 cost incurred to date $750,000 $1,540,000 $2,000,000. Estimated cost $1,250,000 $660,000 -0-. Customer billing to date $650,000 $1,750,000 $2,400,000. Cash collection to date $450,000, $1,250,000 $2,250,000. Calculate the estimated gross profit and revenue to be recognized on this contract for the years ended december 31, 2017,2018 and 2019 assuming nilsen recognizes revenue over time according to percentage of completion. Also prepare the appropriate sections of the 2017 balance sheet

Answer 1

Solution :

Computation of % of completion, revenue recognition and Gross Profit - Nilsen 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)
2017	$750,000	$750,000	$2,000,000	37.50%	$2,400,000	$900,000	$900,000	$150,000
2018	$790,000	$1,540,000	$2,200,000	70.00%	$2,400,000	$1,680,000	$780,000	-$10,000
2019	$460,000	$2,000,000	$2,000,000	100.00%	$2,400,000	$2,400,000	$720,000	$260,000

Nilsen Company
Balance Sheet (Partial)
As on December 31, 2017
Particulars	Amount
Assets:
Current Assets:
Accounts Receivables ($650,000 - $450,000)	$200,000.00
Cost and Profit in excess of billing ($900,000 - $650,000)	$250,000.00