Question

Wildhorse Construction Corporation contracted to construct a building for $7680000. Construction began in 2021 and was completed in 2022. Data relating to the contract are summarized below:

	Year ended December 31,
	2021	2022
Costs incurred	$3135000	$2340000
Estimated costs to complete	2090000	0

Wildhorse uses the percentage-of-completion method as the basis for income recognition. For the years ended December 31, 2021, and 2022, respectively, Wildhorse should report gross profit of

$1323000 and $882000.

$4545000 and $3135000.

$1473000 and $732000.

$0 and $2340000.

Answer 1

Answer: $1,473,000 and $732,000

Calculations:

	2021
Contract price		$7,680,000
(Less): Estimated cost:
Cost to date	$3,135,000
Estimated costs to complete	$2,090,000
Total estimated costs		$5,225,000
Estimated gross profit		$2,455,000
x Percent completed [(3,135,000/5,225,000) x 100]		60%
= Gross profit recognized for 2021		$1,473,000
	2022
Contract price		$7,680,000
(Less): Estimated cost:
Cost to date [$3,135,000+2,340,000]	$5,475,000
Estimated costs to complete	-
Total costs		$5,475,000
Total gross profit		$2,205,000
(less): Gross profit recognized in 2021		($1,473,000)
= Gross profit recognized for 2022		$732,000