In: Accounting
- On December 31, 2018, State Construction Inc. signs a contract with the state of West Virginia Department of Transportation to manufacture a bridge over the New River. State Construction anticipates the construction will take three years. The company’s accountants provide the following contract details relating to the project:
Contract price $520 million |
Estimated construction costs $400 million |
Estimated total profit $120 million |
During the three-year construction period, State Construction incurred costs as follows:
2019 |
$ 40 million |
2020 |
$240 million |
2021 |
$120 million |
State Construction uses the percentage of completion method to recognize revenue.
How much revenue should State Construction recognize in
2019 __________________
2020 __________________
2021 __________________
--Revenues to be recorded
(Amounts are in millions)
2019 |
2020 |
2021 |
|
Revenue |
$ 52.00 |
$ 312.00 |
$ 156.00 |
--Working
Working |
Year end 2019 |
Year end 2020 |
Year end 2021 |
|
A |
Contract Price |
$ 520.00 |
$ 520.00 |
$ 520.00 |
B |
Cost Incurred to Date |
$ 40.00 |
$ 280.00 |
$ 400.00 |
C |
Estimated cost yet to be incurred to complete the contract |
$ 360.00 |
$ 120.00 |
$ - |
D = B+C |
Total Cost |
$ 400.00 |
$ 400.00 |
$ 400.00 |
E = (B/D) x 100 |
% of Completion |
10.00% |
70.00% |
100.00% |
F = A x E |
Revenue to date |
$ 52.00 |
$ 364.00 |
$ 520.00 |
G |
Revenue of Previous year |
$ - |
$ 52.00 |
$ 364.00 |
H = F - G |
Net Revenue this year |
$ 52.00 |
$ 312.00 |
$ 156.00 |