In: Accounting
On June 15, 2018, Sanderson Construction entered into a
long-term construction contract to build a baseball...
On June 15, 2018, Sanderson Construction entered into a
long-term construction contract to build a baseball stadium in
Washington, D.C., for $220 million. The expected completion date is
April 1, 2020, just in time for the 2020 baseball season. Costs
incurred and estimated costs to complete at year-end for the life
of the contract are as follows ($ in millions):
|
2018 |
2019 |
2020 |
| Costs incurred
during the year |
$ |
40 |
|
$ |
80 |
|
$ |
50 |
|
| Estimated costs to complete as
of December 31 |
|
120 |
|
|
60 |
|
|
— |
|
|
Required:
1. Compute the revenue and gross profit will
Sanderson report in its 2018, 2019, and 2020 income statements
related to this contract assuming Sanderson recognizes revenue over
time according to percentage of completion.
2. Compute the revenue and gross profit will
Sanderson report in its 2018, 2019, and 2020 income statements
related to this contract assuming this project does not qualify for
revenue recognition over time.
3. Suppose the estimated costs to complete at the
end of 2019 are $80 million instead of $60 million. Compute the
amount of revenue and gross profit or loss to be recognized in 2019
using the percentage of completion method.
Compute the revenue and gross profit will Sanderson report in
its 2018, 2019, and 2020 income statements related to this contract
assuming Sanderson recognizes revenue over time according to
percentage of completion. (Enter your answers in millions. Loss
amounts should be indicated with a minus sign. Use percentages as
calculated and rounded in the table below to arrive at your final
answer.)
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|
|
|
Percentages of completion |
|
Choose numerator |
÷ |
Choose denominator |
= |
% complete to date |
|
Actual costs to date |
|
Estimated total costs |
|
|
| 2018 |
$40 |
÷ |
$160 |
= |
25.00% |
| 2019 |
$120 |
÷ |
$180 |
= |
66.67% |
| 2020 |
|
|
|
|
100.00% |
|
2018 |
|
|
To date |
Recognized in prior years |
Recognized in 2018 |
|
Construction revenue |
$120 |
$0 |
$120 |
|
Construction expense |
$40 |
$0 |
$40 |
| Gross
profit (loss) |
$80 |
$0 |
$80 |
|
|
|
|
2019 |
|
|
To date |
Recognized in prior years |
Recognized in 2019 |
|
Construction revenue |
|
$120 |
$(120) |
|
Construction expense |
|
$40 |
$(40) |
| Gross
profit (loss) |
|
$80 |
$(80) |
|
|
|
|
2020 |
|
|
To date |
Recognized in prior years |
Recognized in 2020 |
|
Construction revenue |
|
|
$0 |
|
Construction expense |
|
|
$0 |
| Gross profit (loss) |
|
|
$0
|
|
Compute the revenue and gross profit will Sanderson report in
its 2018, 2019, and 2020 income statements related to this contract
assuming this project does not qualify for revenue recognition over
time. (Enter your answers in millions. Loss amounts should be
indicated with a minus sign.)
|
|
|
Year |
Revenue recognized |
Gross Profit (Loss) recognized |
| 2018 |
$0 |
million |
$0 |
million |
| 2019 |
$0 |
million |
$0 |
million |
| 2020 |
$220 |
million |
$50 |
million
|
|
Suppose the estimated costs to complete at the end of 2019 are
$80 million instead of $60 million. Compute the amount of revenue
and gross profit or loss to be recognized in 2019 using the
percentage of completion method. (Enter your answers in millions.
Use percentages as calculated and rounded in the table below to
arrive at your final answer.)
|
|
|
Percentages of completion |
|
Choose numerator |
÷ |
Choose denominator |
= |
% complete to date |
|
Actual costs to date |
|
Estimated total costs |
|
|
| 2019 |
$120 |
÷ |
$200 |
= |
60.00% |
|
|
|
|
|
|
|
2019 |
|
|
To date |
Recognized in prior Years |
Recognized in 2019 |
|
Construction revenue |
|
|
$0 |
|
Construction expense |
|
|
$0 |
| Gross profit (loss) |
|
|
$0 |
|
ekkarill92 answered 1 year ago