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In: Accounting

Beavis Construction Company was the low bidder on a construction project to build an earthen dam...

Beavis Construction Company was the low bidder on a construction project to build an earthen dam for $1,730,000. The project was begun in 2020 and completed in 2021. Cost and other data are presented below:

2020 2021
Costs incurred during the year $ 476,000 $ 1,030,000
Estimated costs to complete 884,000 0
Billings during the year 470,000 1,260,000
Cash collections during the year 370,000 1,360,000


Assume that Beavis recognizes revenue on this contract over time according to percentage of completion.

Required:
Compute the amount of gross profit recognized during 2020 and 2021.

Solutions

Expert Solution

Particulars 2020 2021
cost 476000 1030000
Estimated costs to complete 884000 0
Billings during the year 470000 1260000
Cash collections during the year 370000 1360000
Revenue from contract 1730000
Degree of completion (cost incurred / estimtated cost to complete)
(476000/884000) as the estimtated cost to complete is 0
0.538461538 1
revvenue to be recoginsed degree of completion * contract price -revenue previously recoginsed
(54%*1,730,000. ) (100%*1,730,000. )
revvenue to be recoginsed 931538.4615 798461.5385
Cost 476000 554000
Gross profit 455538.4615 244461.5385
I hope my workings are enough to understand
Thanks in advance for giving me positive ratings
for any clarification feel free to comment on it
May God bless you and have a wonderful day

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