Question

During 2020, Sweet Company started a construction job with a contract price of $1,610,000. The job was completed in 2022. The following information is available.

		2020		2021		2022
Costs incurred to date		$380,000		$847,770		$1,069,000
Estimated costs to complete		620,000		253,230		–0–
Billings to date		302,000		896,000		1,610,000
Collections to date		272,000		812,000		1,418,000

Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used.

Gross profit recognized in 2020		$enter a dollar amount
Gross profit recognized in 2021		$enter a dollar amount
Gross profit recognized in 2022		$enter a dollar amount

Answer 1

Answer

• Requirement: Percentage of completion method

	2020	2021	2022
Gross Profits (Loss)	$231,800	$160,130	$149,070

• Workings

Working		2020	2021	2022
A	Contract Price	$1,610,000	$1,610,000	$1,610,000
B	Cost Incurred to Date	$380,000	$847,770	$1,069,000
C	Estimated cost yet to be incurred to complete the contract	$620,000	$253,230	$0
D = B+C	Total Cost	$1,000,000	$1,101,000	$1,069,000
E = (B/D) x 100	% of Completion	38.00%	77.00%	100.00%
F = A x E	Revenue to date	$611,800	$1,239,700	$1,610,000
G	Revenue of Previous year	$0	$611,800	$1,239,700
H = F - G	Net Revenue this year	$611,800	$627,900	$370,300
I (=B)	Cost to date	$380,000	$847,770	$1,069,000
J	Cost to date of previous year	$0	$380,000	$847,770
K = I - J	Net Cost for the year	$380,000	$467,770	$221,230
L = H - K	Gross Profits	$231,800	$160,130	$149,070