Question
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 |
ekkarill92 answered 2 years agoRelated Solutions
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