Question

CALCULATOR PRINTER VERSION BACK Problem 18-10 On March 1, 2017, Riverbed Construction Company contracted to construct a factory building for Fabrik Manufacturing Inc. for a total contract price of $8,490,000. The building was completed by October 31, 2019. The annual contract costs incurred, estimated costs to complete the contract, and accumulated billings to Fabrik for 2017, 2018, and 2019 are given below: 2017 2018 2019 Contract costs incurred during the year $2,907,000 $2,465,800 $1,987,200 Estimated costs to complete the contract at 12/31 3,553,000 1,987,200 -0- Billings to Fabrik during the year 3,220,000 3,490,000 1,780,000 (a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2017, 2018, and 2019. (Ignore income taxes.) (If answer is 0, please enter 0. Do not leave any fields blank.) 2017 2018

Answer 1

Computation of Gross Profit/(Loss) to be recognised for 2017, 2018 and 2019 :- 2017 2018 2019 Particulars Amount $ Amount $ Amount $ Cumulative cost incurred till previous period 29,07,000 53,72,800 Contract cost incurred during the year 29,07,000 24,65,800 19,87,200 Estimated cost to complete the contract 35,53,000 19,82,000 Total cost to complete the contract 64,60,000 73,54,800 73,60,000 % of completion (A/B) 45.00% 73.05% 100.00% Contract price 84,90,000 84,90,000 84,90,000 Cumulative Revenue to be recognised 38,20,500 62,02,082 84,90,000 Revenue to be recognised for each year 38,20,500 23,81,582 22,87,918 Less: Cost incurred in each year (29,07,000) (24,65,800) (19,87,200) Gross Profit/(Loss) during the year 9,13,500 (84,218) 3,00,718