Question

In 2021, the Southgate Construction Company entered into a contract to construct a bridge for $12,000,000. The bridge was completed in 2023. Information related to the contract is as follows: 2021 2022 2023 Cost incurred during the year $1,840,000 $3,760,000 $4,500,000 Estimated costs to complete as of year-end $6,160,000 $4,400,000 $0 Billings during the year $3,000,000 $4,000,000 $5,000,000 Cash collections during thee year $2,600,000 $3,900,000 $5,100,000 Southgate recognizes revenue using the completed contract method. What amount will Southgate show on the balance sheet at December 31, 2022?

Answer 1

Ans: When Southgate recognizes revenue using the completed contract method. it will recognize profit in the year of 100% Completion of Contract. Southgate will recognize $9,672,400 in Profit and Loss Account and and Recognize total Revenue of $15,272,400 in Profit and loss so Debtors of $15,272,400 may be recognized in Balance Sheet as revenue is generated by selling to Accounts Receivable or debtors

Year	Actual cost Incurred	Total cost incurred Cummulative	Total Estimated Cost	Percentage of Completion	Contract Price	Total Revenue to be Recognized[contract price*% of completion]	Gross Profit/loss
2021	1,840,000	1,840,000	6,160,000	0	12,000,000	0
2022	3,760,000	5,600,000	4,400,000	127.27%	12,000,000	15,272,400	9,672,400
2023	4,500,000	10,100,000	0	-	12,000,000	-