Question
In: Accounting
Problem 18-10 On March 1, 2017, Sandhill Construction Company contracted to construct a factory building for...
Problem 18-10
On March 1, 2017, Sandhill Construction Company contracted to construct a factory building for Fabrik Manufacturing Inc. for a total contract price of $8,310,000. The building was completed by October 31, 2019. The annual contract costs incurred, estimated costs to complete the contract, and accumulated billings to Fabrik for 2017, 2018, and 2019 are given below:
|
2017 |
2018 |
2019 |
||||
| Contract costs incurred during the year | $2,871,000 | $2,304,900 | $2,114,100 (2019 Row) | |||
| Estimated costs to complete the contract at 12/31 | 3,509,000 | 2,114,100 | –0– | |||
| Billings to Fabrik during the year | 3,220,000 | 3,530,000 | 1,560,000 |
(a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2017, 2018, and 2019. (Ignore income taxes.)
2017
Costs to date (12/31/17) $________
Estimated Costs to Complete $________
Estimated Total Costs $________
Percent Complete ________%
Revenue Recognized $________
Costs Incurred $________
Profit/(Loss) Recognized in 2017 $________
2018
Costs to date (12/31/18) $________
Estimated Costs to Complete $________
Estimated Total Costs $________
Percent Complete ________%
Revenue Recognized in 2018 $________
Costs Incurred in 2018 $________
Profit/ (Loss) Recognized in 2018 $________
2019
_______________? $________
Total Revenue Recognized $________
Total Profit on Contract $________
Less: Profit Previously Recognized $________
Profit/(Loss) Recognized in 2019 $________
(b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2017, 2018, and 2019. (Ignore income taxes.)
2017 $________
2018 $________
2019 $________
Solutions
Expert Solution
Solution a:
| Computation of % of completion, revenue recognition and Gross Profit - Sandhil Construction Company | ||||||||
| 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) |
| 2017 | $2,871,000 | $2,871,000 | $6,380,000 | 45.00% | $8,310,000 | $3,739,500 | $3,739,500 | $868,500 |
| 2018 | $2,304,900 | $5,175,900 | $7,290,000 | 71.00% | $8,310,000 | $5,900,100 | $2,160,600 | -$144,300 |
| 2019 | $2,114,100 | $7,290,000 | $7,290,000 | 100.00% | $8,310,000 | $8,310,000 | $2,409,900 | $295,800 |
Solution b:
| Computation of Gross Profit - Revenue on completion - Sandhil Construction Company | |||||
| Year | Actual cost incurred (A) | Total cost incurred till date (B) | Total estimated Cost ( C ) |
Contract Price (D) |
Gross Profit |
| 2017 | $2,871,000 | $2,871,000 | $6,380,000 | $8,310,000 | $0 |
| 2018 | $2,304,900 | $5,175,900 | $7,290,000 | $8,310,000 | $0 |
| 2019 | $2,114,100 | $7,290,000 | $7,290,000 | $8,310,000 | $1,020,000 |
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