Question

In: Accounting

During 2020, Sheridan Company started a construction job with a contract price of $1,376,000. The job...

During 2020, Sheridan Company started a construction job with a contract price of $1,376,000. The job was completed in 2022. The following information is available. The contract is non-cancellable.

2020 2021 2022
Costs incurred to date $344,000 $709,500 $920,200
Estimated costs to complete 516,000 236,500 0
Billings to date (non-refundable) 258,000 774,000 1,376,000
Collections to date 232,200 696,600 1,225,500

Calculate the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

2020 2021 2022
Gross profit / (loss) $enter a dollar amount $enter a dollar amount $enter a dollar amount

Solutions

Expert Solution

Solution

2020 2021 2022
Gross profit $                206,400 $           116,100 $                133,300

Working

2020 2021 2022
A Contract Price $ 1,376,000 $ 1,376,000 $ 1,376,000
B Cost Incurred to Date $ 344,000 $ 709,500 $ 920,200
C Estimated cost yet to be incurred to complete the contract $ 516,000 $ 236,500 $ 0
D = B+C Total Cost $ 860,000 $ 946,000 $ 920,200
E = (D/B) x 100 % of Completion 40% 75% 100%
F = A x E Revenue to date $ 550,400 $ 1,032,000 $ 1,376,000
G Revenue of Previous year $ 0 $ 550,400 $ 1,032,000
H = F - G Net Revenue this year $ 550,400 $ 481,600 $ 344,000
I Cost to date $ 344,000 $ 709,500 $ 920,200
J Cost to date of previous year $ 0 $ 344,000 $ 709,500
K = I - J Net Cost for the year $ 344,000 $ 365,500 $ 210,700
L = H - K Gross Profits $ 206,400 $ 116,100 $ 133,300

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