Question

]Information for 22 to 26. In 2016 Norcraft Sisters Construction agreed to construct a residence hall at University of Houston at a price of $1,200,000. The information relating to the costs and billings for this contract is shown below.

2016. 2017 2018

Cost incurred during the year 280,000 320,000 850,000

Estimated osts to complete. 520,000 300,000 0

Customer billing date 300,000 400,000 850,000

Collection of billing date 200,000 320,000 800,000

22. Assuming that the percentage-of-completion method is used, compute the amount of gross profit (loss) to be recognized on income statement in 2016 and 2017, respectively

A. $400,000 and 300,000

B. $140,000 and 60,000

C. $140,000 and 200,000

D. $0 and. $0

Answer 1

Option c) is correct.

	2016	2017	2018
Cost incurred to date	$        280,000	$        600,000	$        1,450,000
Estimated cost to complete	$        520,000	$        300,000
Total cost	$        800,000	$        900,000	$        1,450,000
Cost completion % (Cost incurred/ total cost)	35.00%	66.67%	100.00%
Revenue (cost completion %*contract price)	$        420,000	$        800,000	$        1,200,000
Cost incurred	$        280,000	$        600,000	$        1,450,000
Profit	$        140,000	$        200,000	$         (250,000)