Question

Problem 5: A $3,600,000 contract is executed to build a service station. Total estimated costs to...

Problem 5: A $3,600,000 contract is executed to build a service station. Total estimated costs to complete the project are $2,340,000 million. The construction company incurred the following costs during the project: $936,000 in 2019; $234,000 in 2020; and $1,170,000 in 2021.

Required: a. Compute revenues, expenses, and income for each year 2019 through 2021 using the percentage-of-completion method.

b. Compute revenues, expenses, and income for each year 2019 through 2021 using the zero gross profit method.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Given total revenue = $3600000

Total cost = $2340000. cost incurred during each years are $936,000 in 2019; $234,000 in 2020; and $1,170,000 in 2021

a). In percentage completion method, Revenue for the period is recognized in ratio of the cost incurred.

So, revenues, expenses, and income for each year 2019 through 2021 are

Year 2019 2020 2021
Revenue $1440000 $360000 $1800000
Cost $936000 $234000 $1170000
Profit $504000 $126000 $630000

b). in zero gross profit method, revenue is equal to cost before the project is completed and all the profit is recognized in the final year of project

So, revenues, expenses, and income for each year 2019 through 2021 are

Year 2019 2020 2021
Revenue $936000 $234000 $2430000
Cost $936000 $234000 $1170000
Profit 0 0 $1260000
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a...
On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,210,000. During 2021, costs of $2,070,000 were incurred with estimated costs of $4,070,000 yet to be incurred. Billings of $2,570,000 were sent, and cash collected was $2,320,000. In 2022, costs incurred were $2,570,000 with remaining costs estimated to be $3,705,000. 2022 billings were $2,820,000 and $2,545,000 cash was collected. The project was completed in 2023 after additional costs of...
On June 15, 2020, Lion Construction signed a $ 360,000 contract to build a small building....
On June 15, 2020, Lion Construction signed a $ 360,000 contract to build a small building. Lion estimated that the total cost would be $ 320,000. Construction started immediately because the required completion date was August 31, 2021. Lion’s relevant data relating to this construction project were as follows:      2020             2021 Actual costs incurred $ 120,000      $ 204,000 Estimated costs to complete 200,000               -0- Progress billings 112,000        248,000 Collections 110,000        250,000 Instructions (show all supporting calculations) Calculate how much...
On June 15, 2018, Sanderson Construction entered into a long-term construction contract to build a baseball...
On June 15, 2018, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $330 million. The expected completion date is April 1, 2020, just in time for the 2020 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions): 2018 2019 2020 Costs incurred during the year $ 90 $ 70 $ 45 Estimated costs to complete as of...
On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a...
On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,225,000. During 2021, costs of $2,090,000 were incurred, with estimated costs of $4,090,000 yet to be incurred. Billings of $2,608,000 were sent, and cash collected was $2,340,000. In 2022, costs incurred were $2,608,000 with remaining costs estimated to be $3,735,000. 2022 billings were $2,858,000, and $2,565,000 cash was collected. The project was completed in 2023 after additional costs of...
Using Percentage-of-Completion and Completed Contract Methods Halsey Building Company signed a contract to build an office...
Using Percentage-of-Completion and Completed Contract Methods Halsey Building Company signed a contract to build an office building for $60,000,000. The scheduled construction costs follow. Year Cost 2016 $12,000,000 2017 18,000,000 2018 10,000,000 Total $40,000,000 The building is completed in 2018. For each year, compute the revenue, expense, and gross profit reported for this construction project using each of the following methods. a. Percentage-of-completion method 2016 2017 2018 Revenue $Answer $Answer $Answer Expense $Answer $Answer $Answer Gross Profit $Answer $Answer $Answer...
Tamarisk Construction Company has entered into a contract beginning January 1, 2017, to build a parking...
Tamarisk Construction Company has entered into a contract beginning January 1, 2017, to build a parking complex. It has been estimated that the complex will cost $601,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $903,000. The following data pertain to the construction period. 2017 2018 2019 Costs to date $270,450 $492,820 $613,000 Estimated costs to complete 330,550 108,180 –0– Progress billings to date 273,000 550,000 903,000 Cash collected to date...
During 2018 ESAU Construction began work on a project 2018-03B for a contract price of $12.8m....
During 2018 ESAU Construction began work on a project 2018-03B for a contract price of $12.8m. ESAU incurred costs of $4m in 2018 and estimated at the end of the year that the remaining costs to complete the job would be $5.5m. During 2019 the company expended $3.0m and at year-end estimated that an additional $3.5m of costs would be incurred in 2020 to finish the project. Assuming that ESAU books $3.0m of expenses for this project in 2019, provide...
During 2018 ESAU Construction began work on a project 2018-03B for a contract price of $12.8m....
During 2018 ESAU Construction began work on a project 2018-03B for a contract price of $12.8m. ESAU incurred costs of $4m in 2018 and estimated at the end of the year that the remaining costs to complete the job would be $5.5m. During 2019 the company expended $3.0m and at year-end estimated that an additional $3.5m of costs would be incurred in 2020 to finish the project. Assuming that ESAU books $3.0m of expenses for this project in 2019, provide...
Imar Construction company signed a contract to build new bridge at a contract price of $5,000,000...
Imar Construction company signed a contract to build new bridge at a contract price of $5,000,000 and total estimated cost of $4,000,000 the project will be completed within 4 years, the cost incurred to date for each period is, first year $1,000,000- second year $2,500,000- third year $3,200,000 and fourth year $4,100,000 while the estimasted cost to, complete the project for each each period is, first year $3,000,000- second year $1,700,000- third year $1,000,000 and fourth year is $0, based...
Circle the correct answer symbol 6.Imar Construction company signed a contract to build new bridge at...
Circle the correct answer symbol 6.Imar Construction company signed a contract to build new bridge at a contract price of $5,000,000 and total estimated cost of $4,000,000 the project will be completed within 4 years, the cost incurred to date for each period is, first year $1,000,000- second year $2,500,000- third year $3,200,000 and fourth year $4,100,000 while the estimasted cost to, complete the project for each each period is, first year $3,000,000- second year $1,700,000- third year $1,000,000 and...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT