Question

Problem 18-09 Sweet Construction Company has entered into a contract beginning January 1, 2020, to build a parking complex. It has been estimated that the complex will cost $605,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $909,000. The following data pertain to the construction period. Costs to date Estimated costs to complete Progress billings to date Cash collected to date 2020 $254,100 350,900 272,000 242,000 2021 $496,100 108,900 550,000 500,000 2022 $614,000 -0- 909,000 909,000 (a) Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period. (If answer is 0, please enter 0. Do not leave any fields blank.) Gross profit recognized in 2020 Gross profit recognized in 2021 Gross profit recognized in 2022 (b) Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period. (If answer is 0, please enter 0. Do not leave any fields blank.) $ Gross profit recognized in 2020 Gross profit recognized in 2021 Gross profit recognized in 2022 Click if you would like to show Work for this question: Open Show Work $

Answer 1

Requirement (a)

Particulars	2020	2021	2022
Price	909000	909000	909000
Estimated costs:
Cost to date:(a)	254100	496100	614000
Estimated cost to complete(b)	350900	108900	0
Estimated total costs(a+b)	605000	605000	614000
Estimated gross profit(Price-est.total cost)	304000	304000	295000
Gross Profit Recognized
($254100/$605000) X $304000	127,680
($496100/$605000 X 304000)- $127,680		121,600
$295,000-$127,680-121,600			45,720

Requirement (b)

2020: No gross profit would be recognized

2021:No gross profit would be recognized

2022:

Total Price $909,000

Total Cost ($614000)

Gross Profit recognized (2022) = $295,000