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Brady Construction Company contracted to build an apartment complex for a price of $5,700,000. Construction began...

Brady Construction Company contracted to build an apartment complex for a price of $5,700,000. Construction began in 2018 and was completed in 2020. The following is a series of independent situations, numbered 1 through 6, involving differing costs for the project. All costs are stated in thousands of dollars.

Estimated Costs to Complete

Costs Incurred During Year

(As of the End of the Year)

Situation

2018

2019

2020

2018

2019

2020

1 1,570 2,340 1,110 3,450 1,110
2 1,570 1,110 2,680 3,450 2,680
3 1,570 2,340 2,160 3,450 2,060
4 570 3,070 1,140 3,990 910
5 570 3,070 1,790 3,990 2,060
6 570 3,070 2,500 5,300 2,330

Complete the following table. (Do not round intermediate calculations. Enter answers in dollars. Round your final answers to the nearest whole dollar. Negative amounts should be indicated by a minus sign.)

Revenue Recognized Over Time Revenue Recognized over time Revenue recognized over time Revenue recognized upon completion Upon Completion Upon Completion
Situation 2018 2019 2020 2018 2019 2020
1
2
3
4
5
6

Solutions

Expert Solution

Solution:

Computation of % of completion, revenue recognition and Gross Profit - Brady Construction Company (Situation 1)
Year Actual cost incurred (A) Total cost incurred till date (B) Total estimated Cost ( C ) % of completion (D) (B/C) Contract Price
(E)
Total Revenue to be recoganized (F) (E * D) Revenue for current period (G) Gross Profit (H) (G - A)
2018 $1,570,000 $1,570,000 $5,020,000 31.27% $5,700,000 $1,782,669 $1,782,669 $212,669
2019 $2,340,000 $3,910,000 $5,020,000 77.89% $5,700,000 $4,439,641 $2,656,972 $316,972
2020 $1,110,000 $5,020,000 $5,020,000 100.00% $5,700,000 $5,700,000 $1,260,359 $150,359
Computation of % of completion, revenue recognition and Gross Profit - Brady Construction Company (Situation 2)
Year Actual cost incurred (A) Total cost incurred till date (B) Total estimated Cost ( C ) % of completion (D) (B/C) Contract Price
(E)
Total Revenue to be recoganized (F) (E * D) Revenue for current period (G) Gross Profit (H) (G - A)
2018 $1,570,000 $1,570,000 $5,020,000 31.27% $5,700,000 $1,782,669 $1,782,669 $212,669
2019 $1,110,000 $2,680,000 $5,360,000 50.00% $5,700,000 $2,850,000 $1,067,331 -$42,669
2020 $2,680,000 $5,360,000 $5,360,000 100.00% $5,700,000 $5,700,000 $2,850,000 $170,000
Computation of % of completion, revenue recognition and Gross Profit - Brady Construction Company (Situation 3)
Year Actual cost incurred (A) Total cost incurred till date (B) Total estimated Cost ( C ) % of completion (D) (B/C) Contract Price
(E)
Total Revenue to be recoganized (F) (E * D) Revenue for current period (G) Gross Profit (H)
2018 $1,570,000 $1,570,000 $5,020,000 31.27% $5,700,000 $1,782,669 $1,782,669 $212,669 $1,973,057 - $1,680,000
2019 $2,340,000 $3,910,000 $5,970,000 65.49% $5,700,000 $3,733,166 $1,950,497 -$482,669 $5,700,000 - $5,970,000 - $212,669
2020 $2,160,000 $6,070,000 $6,070,000 100.00% $5,700,000 $5,700,000 $1,966,834 -$100,000 $5,700,000 - $6,070,000 - $212,669 + $482,669
Computation of % of completion, revenue recognition and Gross Profit - Brady Construction Company (Situation 4)
Year Actual cost incurred (A) Total cost incurred till date (B) Total estimated Cost ( C ) % of completion (D) (B/C) Contract Price
(E)
Total Revenue to be recoganized (F) (E * D) Revenue for current period (G) Gross Profit (H) (G - A)
2018 $570,000 $570,000 $4,560,000 12.50% $5,700,000 $712,500 $712,500 $142,500
2019 $3,070,000 $3,640,000 $4,550,000 80.00% $5,700,000 $4,560,000 $3,847,500 $777,500
2020 $1,140,000 $4,780,000 $4,780,000 100.00% $5,700,000 $5,700,000 $1,140,000 $0
Computation of % of completion, revenue recognition and Gross Profit - Brady Construction Company (Situation 5)
Year Actual cost incurred (A) Total cost incurred till date (B) Total estimated Cost ( C ) % of completion (D) (B/C) Contract Price
(E)
Total Revenue to be recoganized (F) (E * D) Revenue for current period (G) Gross Profit (H) (G - A)
2018 $570,000 $570,000 $4,560,000 12.50% $5,700,000 $712,500 $712,500 $142,500
2019 $3,070,000 $3,640,000 $5,700,000 63.86% $5,700,000 $3,640,000 $2,927,500 -$142,500
2020 $1,790,000 $5,430,000 $5,430,000 100.00% $5,700,000 $5,700,000 $2,060,000 $270,000
Computation of % of completion, revenue recognition and Gross Profit - Brady Construction Company (Situation 6)
Year Actual cost incurred (A) Total cost incurred till date (B) Total estimated Cost ( C ) % of completion (D) (B/C) Contract Price
(E)
Total Revenue to be recoganized (F) (E * D) Revenue for current period (G) Gross Profit (H)
2018 $570,000 $570,000 $5,870,000 9.71% $5,700,000 $553,492 $553,492 -$170,000 $5,700,000 - 5,870,000
2019 $3,070,000 $3,640,000 $5,970,000 60.97% $5,700,000 $3,475,377 $2,921,885 -$100,000 $5,700,000 - 5,970,000+ $170,000
2020 $2,500,000 $6,140,000 $6,140,000 100.00% $5,700,000 $5,700,000 $2,224,623 -$170,000 $5,700,000 - 6,140,000+ $170,000 + $100,000
Computation of Gross Profit - Revenue on completion - Brady Construction Company (Situation 1)
Year Actual cost incurred (A) Total cost incurred till date (B) Total estimated Cost ( C ) Contract Price
(D)
Gross Profit
2018 $1,570,000 $1,570,000 $5,020,000 $5,700,000 $0
2019 $2,340,000 $3,910,000 $5,020,000 $5,700,000 $0
2020 $1,110,000 $5,020,000 $5,020,000 $5,700,000 $680,000
Computation of Gross Profit - Revenue on completion - Brady Construction Company (Situation 2)
Year Actual cost incurred (A) Total cost incurred till date (B) Total estimated Cost ( C ) Contract Price
(D)
Gross Profit
2018 $1,570,000 $1,570,000 $5,020,000 $5,700,000 $0
2019 $1,110,000 $2,680,000 $5,360,000 $5,700,000 $0
2020 $2,680,000 $5,360,000 $5,360,000 $5,700,000 $340,000
Computation of Gross Profit - Revenue on completion - Brady Construction Company (Situation 3)
Year Actual cost incurred (A) Total cost incurred till date (B) Total estimated Cost ( C ) Contract Price
(D)
Gross Profit
2018 $1,570,000 $1,570,000 $5,020,000 $5,700,000 $0
2019 $2,340,000 $3,910,000 $5,970,000 $5,700,000 -$270,000
2020 $2,160,000 $6,070,000 $6,070,000 $5,700,000 -$100,000
Computation of Gross Profit - Revenue on completion - Brady Construction Company (Situation 4)
Year Actual cost incurred (A) Total cost incurred till date (B) Total estimated Cost ( C ) Contract Price
(D)
Gross Profit
2018 $570,000 $570,000 $4,560,000 $5,700,000 $0
2019 $3,070,000 $3,640,000 $4,550,000 $5,700,000 $0
2020 $1,140,000 $4,780,000 $4,780,000 $5,700,000 $920,000
Computation of Gross Profit - Revenue on completion - Brady Construction Company (Situation 5)
Year Actual cost incurred (A) Total cost incurred till date (B) Total estimated Cost ( C ) Contract Price
(D)
Gross Profit
2018 $570,000 $570,000 $4,560,000 $5,700,000 $0
2019 $3,070,000 $3,640,000 $5,700,000 $5,700,000 $0
2020 $1,790,000 $5,430,000 $5,430,000 $5,700,000 $270,000
Computation of Gross Profit - Revenue on completion - Brady Construction Company (Situation 6)
Year Actual cost incurred (A) Total cost incurred till date (B) Total estimated Cost ( C ) Contract Price
(D)
Gross Profit
2018 $570,000 $570,000 $5,870,000 $5,700,000 -$170,000
2019 $3,070,000 $3,640,000 $5,970,000 $5,700,000 -$100,000
2020 $2,500,000 $6,140,000 $6,140,000 $5,700,000 -$170,000
Gross Profit (Loss) Recognized
Situation Revenue Recognized over time Revenue recognized upon completion
2018 2019 2020 2018 2019 2020
1 $212,669 $316,972 $150,359 $0 $0 $680,000
2 $212,669 -$42,669 $170,000 $0 $0 $340,000
3 $212,669 -$482,669 -$100,000 $0 -$270,000 -$100,000
4 $142,500 $777,500 $0 $0 $0 $920,000
5 $142,500 -$142,500 $270,000 $0 $0 $270,000
6 -$170,000 -$100,000 -$170,000 -$170,000 -$100,000 -$170,000

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