Question

During 2020, Sandhill Company started a construction job with a contract price of $1,590,000. The job was completed in 2022. The following information is available.

		2020		2021		2022
Costs incurred to date		$424,200		$885,330		$1,060,000
Estimated costs to complete		585,800		207,670		–0–
Billings to date		299,000		908,000		1,590,000
Collections to date		273,000		819,000		1,435,000

Part 1

Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used.

Gross profit recognized in 2020		$
Gross profit recognized in 2021		$
Gross profit recognized in 2022		$

Answer 1

· Requirement asked

Requirement 1
	2020	2021	2022
Gross Profits (Loss)	$243,600	$158,970	$127,430

--Working

Working		2020	2021	2022
A	Contract Price	$1,590,000	$1,590,000	$1,590,000
B	Cost Incurred to Date	$424,200	$885,330	$1,060,000
C	Estimated cost yet to be incurred to complete the contract	$585,800	$207,670	$0
D = B+C	Total Cost	$1,010,000	$1,093,000	$1,060,000
E = (B/D) x 100	% of Completion	42.00%	81.00%	100.00%
F = A x E	Revenue to date	$667,800	$1,287,900	$1,590,000
G	Revenue of Previous year	$0	$667,800	$1,287,900
H = F - G	Net Revenue this year	$667,800	$620,100	$302,100
I (=B)	Cost to date	$424,200	$885,330	$1,060,000
J	Cost to date of previous year	$0	$424,200	$885,330
K = I - J	Net Cost for the year	$424,200	$461,130	$174,670
L = H - K	Gross Profits	$243,600	$158,970	$127,430