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 |
Answer:
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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