Question

Brady Construction Company contracted to build an apartment complex for a price of $5,200,000. Construction began in 2018 and was completed in 2020. The following is a series of independent situations, numbered 1 through 6, involving differing costs for the project. All costs are stated in thousands of dollars.

							Estimated Costs to Complete
	Costs Incurred During Year						(As of the End of the Year)
Situation	2018		2019		2020		2018		2019		2020
1	1,520		2,190		960		3,150		960		—
2	1,520		960		2,480		3,150		2,480		—
3	1,520		2,190		1,760		3,150		1,660		—
4	520		3,020		1,040		3,640		885		—
5	520		3,020		1,440		3,640		1,660		—
6	520		3,020		2,000		4,800		1,880		—
Required: Complete the following table. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar. Negative amounts should be indicated by a minus sign.) Gross Profit (Loss) Recoginzied Situation Revenue Recognized Over Time Revenue Recognized Upon Completon 2016 2017 2018 2016 2017 2018 1 2 3 4 5 6 Thank You

Answer 1

We follow the Percentage of completion method for revenue recognition in long-term construction contracts which span over more than one accounting periods.
Revenue recognised = Percentage of work completed in the period / Total contract value
Percentage of work completed = Expenditures Incurred from Inception to Date / Total Estimated Costs for the Contract
Based on above formula , we will calculate the percentage of work completed in each situation
Situation	2016	2017	2018
1	32.55%	46.90%	20.56%
2	32.55%	19.35%	48.10%
3	32.55%	40.78%	26.67%
4	12.50%	68.25%	19.25%
5	12.50%	58.08%	29.42%
6	9.77%	55.72%	34.51%
Answer
Situation	Revenue recognised over time			Cost incurred			Gross profit (loss) Recognised
	2016	2017	2018	2016	2017	2018	2016	2017	2018
1	$1,692,505	$2,438,544	$1,068,951	$1,520,000	$2,190,000	$960,000	$172,505	$248,544	$108,951
2	$1,692,505	$1,006,452	$2,501,043	$1,520,000	$960,000	$2,480,000	$172,505	$46,452	$21,043
3	$1,692,505	$2,120,670	$1,386,824	$1,520,000	$2,190,000	$1,760,000	$172,505	-$69,330	-$373,176
4	$650,000	$3,548,927	$1,001,073	$520,000	$3,020,000	$1,040,000	$130,000	$528,927	-$38,927
5	$650,000	$3,020,000	$1,530,000	$520,000	$3,020,000	$1,440,000	$130,000	$0	$90,000
6	$508,271	$2,897,417	$1,794,312	$520,000	$3,020,000	$2,000,000	-$11,729	-$122,583	-$205,688