Question

Pearl 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 $606,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $902,000. The following data pertain to the construction period. Costs to date Estimated costs to complete Progress billings to date Cash collected to date 2020 2021 2022 $272,700 $466,620 $618,000 333,300 139,380 -0- 273,000 546,000 902,000 243,000 496,000 902,000 (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 o please enter O. 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 $

Answer 1

SOLDOO . . Answer 1 Answer C9) Percentage of completion method Contracts which are on long terios parjod me completed after years Igter byen costs are incurned throughout the rcuted throughout the perjoi. In this scengile, company gets questions perjol. In this about recognition of Huerue os. per accough accounting concepto percentage : acedygl accounting concept. Percentage of completion method, is the method which gives how do we recognice zvegye coon the revegye s ouring the period of contract. Revenue under Percentage of completion is recognized og percentage of cost incurred from the total cost estimated. Then toty) control price multiplied by percentage of cost incurred and also profit is recognized by revenue less total costs. Partjulgus .. 2020 . I 2021 2022 . Costs to Dabei 272700 1 466620 618000 Estimated costs to completel 333,300. 1393 90 Estinghed Total Cost (976) 606000 606000 618000 contract dice e .., 902000 gozoue Eshinated Gross Aw At GS- 296000 296000 284000 | Percenfyge of completing 45% 77% 100% Eslingbed T-HI costs) (706000 * 100) 466620 618000 2 618o0o Revenue Recognized in Prior Year 133200 , 227920 (133200°+94760) Val Total Revenue Reagojzed (extf 1 33200 227920 284000 - la cross profit recognized 133200 94720 (b) Completed Comleget method Another method of Reconizing revenue under long term contact it completed contact methol. In complete contact method, revenue is recognized only. when the contact is completed. It means that revenue is recognized at the .. last year of contact when contact is completes. This method is useful when the contractor is difficult to estingue the cost of conhecii P+եյավց- 2022 284000 606000 5602 2010 2021 Gross Profje Recogier o to t 2840 902000 - 618000)

7 1 33200 94720 ] 5 colo " The answers are G) Using Percentage of completing Method Gross Profil Recognized in 2020 - Gross Profit recognize el in 2017 - Gross Profit Recognized in 2012 (4) Using completed Contract method Gross profit Recogajmet in 2010 — Gros's Profil Recognized in 2011 — Gross Profil Recognizel in 2012 ~ C o 284000)