Question

Problem 18-09 Your answer is partially correct. Try again. Grouper 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 $598,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $897,000. The following data pertain to the construction period. 2020 2021 2022 Costs to date $275,080 $412,620 $607,000 Estimated costs to complete 322,920 185,380 –0– Progress billings to date 272,000 545,000 897,000 Cash collected to date 242,000 495,000 897,000 (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 $

Answer 1

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Part 1
	2020	2021	2022
Contract price	$                                                        897,000	$                                                                                    897,000	$                                                                                     897,000
Actual costs to date	$                                                        275,080	$                                                                                    412,620	$                                                                                     607,000
Estimated costs to complete	$                                                        272,000	$                                                                                    545,000	$                                                                                     897,000
Total estimated costs	$                                                        547,080	$                                                                                    957,620	$                                                                                 1,504,000
Estimated gross profit
(actual in 2022)	$                                                        349,920	$                                                                                     -60,620	$                                                                                   -607,000
Revenue Recognition:	50.28%	43.09%	40.36%
2020	$275,080/$547,080*$897,000		$                                                                                     451,025
2021	$412,620/$957,620*$897,000	Less: $451,025	$                                                                                     (64,525)
2022	$897,000-$451,025-($64,525)		$                                                                                     510,500
Gross profit (loss) recognized:
2020	$451,025-$275,080		$                                                                                     175,945
2021	($60,620)-$175,945		$                                                                                  (236,565)
2022	$60,620-$607,000		$                                                                                   -546,380
Part 2
	2020	2021	2022
Contract price	$                                                        897,000	$                                                                                    897,000	$                                                                                     897,000
Actual costs to date	$                                                        275,080	$                                                                                    412,620	$                                                                                     607,000
Estimated costs to complete	$                                                        272,000	$                                                                                    545,000	$                                                                                     897,000
Total estimated costs	$                                                        547,080	$                                                                                    957,620	$                                                                                 1,504,000
Estimated gross profit
(actual in 2023)	$                                                        349,920	$                                                                                     -60,620	$                                                                                   -607,000
	Revenue Recognition:	Gross profit (loss) recognized:
Year 2020	$                                                                   -	$                                                                                                -
Year 2021	$                                                                   -	$                                                                                                -
Year 2022	$                                                    8,025,000	$                                                                                    290,000	Progress Billing $897,000-Cost $607,000
Total	$                                                    8,025,000	$                                                                                    290,000