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Skysong Construction Company began operations on January 1, 2017. During the year, Skysong Construction entered into...

Skysong Construction Company began operations on January 1, 2017. During the year, Skysong Construction entered into a contract with Lundquist Corp. to construct a manufacturing facility. At that time, Skysong estimated that it would take 5 years to complete the facility at a total cost of $4,532,000. The total contract price for construction of the facility is $6,033,000. During the year, Skysong incurred $1,294,800 in construction costs related to the construction project. The estimated cost to complete the contract is $4,100,200. Lundquist Corp. was billed and paid 27% of the contract price. Prepare schedules to compute the amount of gross profit to be recognized for the year ended December 31, 2017, and the amount to be shown as “costs and recognized profit in excess of billings” or “billings in excess of costs and recognized profit” at December 31, 2017, under each of the following methods. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). If answer is 0, please enter 0. Do not leave any fields blank.) (a) Completed-contract method. Gross Profit to be recognized $ Computation of Billings on Uncompleted Contract in Excess of Related Costs under Completed-Contract Method $ $ (b) Percentage-of-completion method. Computation of Gross Profit to Be Recognized under Percentage-of-Completion Method $ $ % $

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Expert Solution

PART A

Under Completed-contract method no Gross Profit to be recognized before completion of contract.

Computation of billing:

Construction cost incurred $1,294,800
Partial billing on contract $ 1,628,910
- $ 334110

2)  Percentage-of Completion Method

Gross profit to be recognized for the year ended December 31, 2014

Total Contract Price 6033000
Total Estimated Cost: -5395000
Estimated Total Gross Profit from Contract 638000
Percentage of Completion 24%
Gross Profit to be recognized during the year: 638000*22% 153120

Billings on Uncompleted Contract in Excess of Related Costs and Recognized Profit

Construction Costs Incurred during the Year 1298400
Gross Profit to be recognized during the year 153120
Total Charged to Construction in Process 1451520
Less: Partial Billings on contract: 6240000*25% -1628910
Billings on uncompleted contract in excess of related cost & recognized profit -177390

ekkarill92 answered 2 years ago
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