In: Accounting
Beck Construction Company began work on a new building project
on January 1, 2017. The project is to be completed by December 31,
2019, for a fixed price of $108 million. The following are the
actual costs incurred and estimates of remaining costs to complete
the project that were made by Beck's accounting staff:
Years | Actual costs incurred in each year |
Estimated remaining costs to complete the project (measured at Dec. 31 of each year) |
||||
2017 | $ | 30 | million | $ | 60 | million |
2018 | $ | 45 | million | $ | 45 | million |
2019 | $ | 35 | million | $ | 0 | |
Required:
What amount of gross profit (or loss) would Beck record on this
project in each year, assuming that Beck recognizes revenue for
this project over time according to percentage of
completion?
Place answers in the spaces provided below and show supporting
computations. (Loss amounts should be indicated with a
minus sign. Enter your answers in millions (i.e., 10,000,000 should
be entered as 10).)
2017 | 2018 | 2019 | |
Opening WIP | - | 30.00 | 75.00 |
Cost incurred | 30.00 | 45.00 | 35.00 |
Total Incurred till date | 30.00 | 75.00 | 110.00 |
Estimated cost | 60.00 | 45.00 | - |
Total Cost | 90.00 | 120.00 | 110.00 |
%age completion | 33.33% | 62.50% | 100.00% |
Contract Price | 108.00 | 108.00 | 108.00 |
Estimated profit | 18.00 | (12.00) | (2.00) |
Revenue recognizible | 36.00 | 67.50 | 108.00 |
Revenue recognized till prev year | - | (36.00) | (67.50) |
Revenue for current year | 36.00 | 31.50 | 40.50 |
Cost | (30.00) | (49.50) | (30.50) |
Gross Profit | 6.00 | (18.00) | 10.00 |
Total estimated loss less profit recognized till last year |