Teal Construction Company has entered into a contract beginning January 1, 2020, to build a parking...

Teal 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 $597,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $908,000. The following data pertain to the construction period.

	2020	2021	2022
Costs to date	$286,560	$453,720	$609,000
Estimated costs to complete	310,440	143,280	–0–
Progress billings to date	273,000	548,000	908,000
Cash collected to date	243,000	498,000	908,000

(a) Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period.

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

Gross profit recognized in 2020

Gross profit recognized in 2021

Gross profit recognized in 2022

Expert Solution

Requirement [a]

	2020	2021	2022
Gross Profits (Loss)	$ 149,280.00	$ 87,080.00	$ 62,640.00

--Working

Working		2020	2021	2022
A	Contract Price	$ 908,000.00	$ 908,000.00	$ 908,000.00
B	Cost Incurred to Date	$ 286,560.00	$ 453,720.00	$ 609,000.00
C	Estimated cost yet to be incurred to complete the contract	$ 310,440.00	$ 143,280.00	$ -
D = B+C	Total Cost	$ 597,000.00	$ 597,000.00	$ 609,000.00
E = (B/D) x 100	% of Completion	48.00%	76.00%	100.00%

F = A x E	Revenue to date	$ 435,840.00	$ 690,080.00	$ 908,000.00
G	Revenue of Previous year	$ -	$ 435,840.00	$ 690,080.00
H = F - G	Net Revenue this year	$ 435,840.00	$ 254,240.00	$ 217,920.00

I (=B)	Cost to date	$ 286,560.00	$ 453,720.00	$ 609,000.00
J	Cost to date of previous year	$ -	$ 286,560.00	$ 453,720.00
K = I - J	Net Cost for the year	$ 286,560.00	$ 167,160.00	$ 155,280.00

L = H - K	Gross Profits	$ 149,280.00	$ 87,080.00	$ 62,640.00

Requirement [b]

Gross Profits in:
2020 = $ 0
2021 = $ 0
2022 = $908000 - $ 609000 = $ 299,000

ekkarill92 answered 1 year ago

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