# At the beginning of 2017, the

At the beginning of 2017, the Mini Construction Company receiveda contract to build an office building for \$1.2 million. Mini willconstruct the building according to specifications provided by thebuyer, and the project is estimated to take four years to complete.The cost breakdown is as follows. Determine the amount of revenueand gross profit to be recognized each year. (do not include \$ inyour answer, round to 4 decimal places).

 2017 2018 2019 2020 cost incurred during the year 224,000 331,000 333,000 200,000 Estimated cost to complete 800,000 555,000 222,000 0
 2017 2018 2019 2020 Revenue to be recognized in this period Gross Profit

Solution

 2017 2018 2019 2020 Revenue to be recognized inthis period \$               262,500 \$          337,500 \$               360,000 \$             240,000 Gross profit \$                  38,500 \$               6,500 \$                 27,000 \$                40,000

Working

 2017 2018 2019 2020 A Contract Price \$ 1,200,000 \$ 1,200,000 \$ 1,200,000 \$ 1,200,000 B Cost Incurred to Date \$ 224,000 \$ 555,000 \$ 888,000 \$ 1,088,000 C Estimated cost yet to be incurred tocomplete the contract \$ 800,000 \$ 555,000 \$ 222,000 D = B+C Total Cost \$ 1,024,000 \$ 1,110,000 \$ 1,110,000 \$ 1,088,000 E = (D/B) x100 % ofCompletion 22% 50% 80% 100% F = A x E Revenue to date \$ 262,500 \$ 600,000 \$ 960,000 \$ 1,200,000 G Revenue of Previous year \$ 0 \$ 262,500 \$ 600,000 \$ 960,000 H = F – G Net Revenue thisyear \$ 262,500 \$ 337,500 \$ 360,000 \$ 240,000 I Cost to date \$ 224,000 \$ 555,000 \$ 888,000 \$ 1,088,000 J Cost to date of previousyear \$ 0 \$ 224,000 \$ 555,000 \$ 888,000 K = I – J Net Cost for theyear \$ 224,000 \$ 331,000 \$ 333,000 \$ 200,000 L = H – K GrossProfits \$ 38,500 \$ 6,500 \$ 27,000 \$ 40,000

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