Waterway Construction Company has entered into a contract beginning January 1, 2020, to build a parking...

Waterway 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 $600,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $901,000. The following data pertain to the construction period.

	2020	2021	2022
Costs to date	$246,000	$432,000	$612,000
Estimated costs to complete	354,000	168,000	–0–
Progress billings to date	270,000	546,000	901,000
Cash collected to date	240,000	496,000	901,000

(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		$

Expert Solution

Requirement a

Gross profit recognized in 2020	$ 125,050
Gross profit recognized in 2021	$ 94,550
Gross profit recognized in 2022	$ 73,400

Working

Working		2020	2021	2022
A	Contract Price	$ 905,000	$ 905,000	$ 905,000
B	Cost Incurred to Date	$ 246,000	$ 432,000	$ 612,000
C	Estimated cost yet to be incurred to complete the contract	$ 354,000	$ 168,000	$ 0
D = B+C	Total Cost	$ 600,000	$ 600,000	$ 612,000
E = (D/B) x 100	% of Completion	41%	72%	100%

F = A x E	Revenue to date	$ 371,050	$ 651,600	$ 905,000
G	Revenue of Previous year	$ 0	$ 371,050	$ 651,600
H = F - G	Net Revenue this year	$ 371,050	$ 280,550	$ 253,400

I	Cost to date	$ 246,000	$ 432,000	$ 612,000
J	Cost to date of previous year	$ 0	$ 246,000	$ 432,000
K = I - J	Net Cost for the year	$ 246,000	$ 186,000	$ 180,000

L = H - K	Gross Profits	$ 125,050	$ 94,550	$ 73,400

Requirement b

Gross profit recognized in 2020	$ 0.00
Gross profit recognized in 2021	$ 0.00
Gross profit recognized in 2022	$293,000

ekkarill92 answered 9 months ago

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