*Problem 18-11 Your answer is partially correct. Try again On July 1, 2017, Cran
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Question
*Problem 18-11 Your answer is partially correct. Try again On July 1, 2017, Crane Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,880,000. On July 1, Crane estimated that it would take between 2 and 3 years to complete the building. On December 31, 2019, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Gumbel for 2017, 2018, and 2019. At At At 12/31/17 12/31/18 12/31/19 $8,00051,194,000 $,098,500 Contract rsts incrd to date Estimated costs to complctc the controct Billings to Gumbel 1,192,000 796,000 300,U0O 1,10,00 1,820,000 (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, 201?, 2018, and 2019. (lgnore income taxes.) (If answer is 0, plcase enter 0. Do not leave any field blank. Enter negative amounts using cither a negative sign preceding the number e.g.-45 or parentheses c.g. (45).) 017 osts to ciate 1731/17 stimated Costs to Cn 49000 ercent Complet B000 Loss !)ized in 201Explanation / Answer
A) % completion method
Note :
1. % completion = cost incurred upto date / (Cost incurred + estimated cost)
2017 = 298000 / (298000+1192000) = 20%
2018 = 1194000 / (1194000 + 796000) = 60%
2019 = 2098500 / 2098500 = 100%
B) Complete contract method - In this method profit will not be recognised untill it gets completed 100%. so Profit and loss will be deffered untill project completition.
Particulars 2017 2018 2019 Cost to date 298000 1194000 2098500 Estimated cost to complete 1192000 796000 0 Estimated total cost 1490000 1990000 2098500 Contract price 1880000 1880000 1880000 % completion 20% 60% 100% Revenue recognised (contract price* % completion) 376000 1128000 1880000 Cost incurred 298000 1194000 2098500 Profit to be recognised 78000 (66000) (218500) Less: profit already recognised 0 78000 (144000) Profit / (loss)recognised in current year 78000 (144000) (74500)Related Questions
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