Question

1. Stanford Company has contracted to build for the City of New London a new courthouse. The estimated cost of the project is $6,000,000, and the contract price is $9,000,000. The courthouse took three years to complete as follows:

                                                2018                       2019                       2020
Costs to date                      $1,500,000           $4,000,000           $6,200,000
Cost to complete             $4,500,000           $2,200,000           $0

Amounts billed to date $1,400,000           $5,800,000           $9,000,000
Amounts collected to date
                                             $1,300,000           $4,300,000           $9,000,000

Determine the gross profit to be recognized for

                                         2018                           2019                   2020

Answer 1

Year	Gross Profit Recognised
2018	750000
2019	1056452
2020	993548

Working Note:

Percentage of completion
	Numerator	/	Denominator	=	% of completion
	Actual Costs to date		Estimated total costs
2018	1500000		6000000		25%
2019	4000000		6200000		65%
2020	6200000		6200000		100%
2018
	To date		Recognised in previous year		Recognised in 2018
Construction Revenue	2250000		0		2250000
Construction Expense	1500000		0		1500000
Gross Profit (loss)	750000		0		750000
2019
	To date		Recognised in previous year		Recognised in 2019
Construction Revenue	5806452		2250000		3556452
Construction Expense	4000000		1500000		2500000
Gross Profit (loss)	1806452		750000		1056452
2020
	To date		Recognised in previous year		Recognised in 2020
Construction Revenue	9000000		5806452		3193548
Construction Expense	6200000		4000000		2200000
Gross Profit (loss)	2800000		1806452		993548