Brady Construction Company contracted to bulld an apartment complex for a price
ID: 2392091 • Letter: B
Question
Brady Construction Company contracted to bulld an apartment complex for a price of $6,500,000. Construction began In 2018 and was completed in 2020. The following is a series of Independent situations, numbered 1 through 6, Involving differing costs for the project. All costs are stated In thousands of dollars. Estimated Costs to Complete (As of the End of the Costs Incurred During Year Year) Sltuation 2018 2019 2020 2018 2019 2020 11,650 2,580 1350 3,930 1350 2 1650 1350 3,000 3,930 3,000 3 1650 2,580 2,800 3,930 2,700 4 650 3,150 1,300 4,550 950 5 650 3,150 2,350 4,550 2,700 6 650 3,150 3,300 6,055 3,050 Requlrec Complete the following table. (Do not round Intermedlete calculatlons. Enter answers In dollars. Round your final answers to the nearest whole doller. Negatlve amounts should be Indicated by a mlnus sign.) Gross Profit (Loss) Recogniz Revenue Recognized Over Time Revenue Recognized Upon Completion Situation 2018 2019 2020 2018 2019 2020 5 272,043Explanation / Answer
Gross Profit (Loss) Recognised
Revenue Recognised Over Time
Revenue Recognised Upon completion
Situations
2018
2019
2020
2018
2019
2020
1
272043
425376
222581
0
0
(6500000 – 5280000)
=1220000
2
272043
-22043
250000
0
0
(6500000 – 6930000)
=-430000
3
272043
-534515
-267528
0
0
(6500000 – 6630000)
=-130000
4
162500
1237500
0
0
0
(6500000 – 5500000)
=1000000
5
162500
-162500
350000
0
0
(6500000 – 7250000)
=-750000
6
-19873
-174272
-405855
0
0
(6500000 – 9105000)
=-2605000
Revenue Recognised Over Time (Percentage completion Method) :-
Total gross profit = Contract Price – Total cost
Total cost = Cost incurred during the year + Estimated cost to complete
Situation 1 :-
Contract Price = 6500000
Total cost = 1650000{cost incurred} + 3930000 {Estimated cost} = 5580000
Total Gross Profit = 6500000 – 5580000 = 920000
2018 = Gross profit recognized = Total gross profit * percentage of completion
% of completion = cost incurred/ total cost
= 1650000/5580000 = 29.57%
GP recognized = 920000 * 29.57% = 272043
2019 = % = (1650 + 2580)/(1650 + 2580 + 1350) = 75.81%
Total GP = 6500000 – 5580000 = 920000
GP = 920000 * 75.81% = 697419
GP recognized = 697419 – 272043 = 425376
2020 = GP recognized = 920000 – 697419 = 222581
Situation 2 :-
Contract Price = 6500000
Total cost = 1650000{cost incurred} + 3930000 {Estimated cost} = 5580000
Total Gross Profit = 6500000 – 5580000 = 920000
2018 = Gross profit recognized = Total gross profit * percentage of completion
% of completion = cost incurred/ total cost
= 1650000/5580000 = 29.57%
GP recognized = 920000 * 29.57% = 272043
2019 = % = (1650 + 1350)/(1650 + 1350 + 3000) = 50%
Total GP = 6500000 – 6000000 = 500000
GP = 500000 * 50% = 250000
GP recognized = 250000 – 272043 = -22043
2020 = GP recognized = 500000 – 250000= 250000
Situation 3 :-
Contract Price = 6500000
Total cost = 1650000{cost incurred} + 3930000 {Estimated cost} = 5580000
Total Gross Profit = 6500000 – 5580000 = 920000
2018 = Gross profit recognized = Total gross profit * percentage of completion
% of completion = cost incurred/ total cost
= 1650000/5580000 = 29.57%
GP recognized = 920000 * 29.57% = 272043
2019 = % = (1650 + 2580)/(1650 + 2580 + 2700) = 61.04%
Total GP = 6500000 – 6930000= -430000
GP = -430000 * 61.04% = -262472
GP recognized = -262472 – 272043 = -534515
2020 = GP recognized
Total GP = 6500000 – 7030000= -530000
GP recognized = -530000 + 262472= -267528
Situation 4 :-
Contract Price = 6500000
Total cost = 650000{cost incurred} + 4550000 {Estimated cost} = 5200000
Total Gross Profit = 6500000 – 5200000 = 1300000
2018 = Gross profit recognized = Total gross profit * percentage of completion
% of completion = cost incurred/ total cost
= 650000/5200000 = 12.5%
GP recognized = 1300000 * 12.5% = 162500
2019 = % = (650 + 3150)/( 650 + 3150 + 950) = 80%
Total GP = 6500000 – 4750000= 1750000
GP = 1750000 * 80%= 1400000
GP recognized = 1400000 – 162500= 1237500
2020 = GP recognized
Total GP = 6500000 – 5100000= 1400000
GP recognized = 1400000 - 1400000= 0
Situation 5 :-
Contract Price = 6500000
Total cost = 650000{cost incurred} + 4550000 {Estimated cost} = 5200000
Total Gross Profit = 6500000 – 5200000 = 1300000
2018 = Gross profit recognized = Total gross profit * percentage of completion
% of completion = cost incurred/ total cost
= 650000/5200000 = 12.5%
GP recognized = 1300000 * 12.5% = 162500
2019 = % = (650 + 3150)/( 650 + 3150 + 2700) = 58.46%
Total GP = 6500000 – 6500000= 0
GP recognized = 0 – 162500= – 162500
2020 = GP recognized
Total GP = 6500000 – 6150000= 350000
GP recognized = 350000
Situation 6 :-
Contract Price = 6500000
Total cost = 650000{cost incurred} + 6055000 {Estimated cost} = 6705000
Total Gross Profit = 6500000 – 6705000= -205000
2018 = Gross profit recognized = Total gross profit * percentage of completion
% of completion = cost incurred/ total cost
= 650000/6705000= 9.69%
GP recognized = -205000* 9.69% = -19873
2019 = % = (650 + 3150)/( 650 + 3150 + 3050) = 55.47%
Total GP = 6500000 – 6850000= -350000
GP = -350000 * 55.47%= -194145
GP recognized = -194145 + 19873= – 174272
2020 = GP recognized
Total GP = 6500000 – 7100000= -600000
GP recognized = -600000 + 194145 = -405855
Gross Profit (Loss) Recognised
Revenue Recognised Over Time
Revenue Recognised Upon completion
Situations
2018
2019
2020
2018
2019
2020
1
272043
425376
222581
0
0
(6500000 – 5280000)
=1220000
2
272043
-22043
250000
0
0
(6500000 – 6930000)
=-430000
3
272043
-534515
-267528
0
0
(6500000 – 6630000)
=-130000
4
162500
1237500
0
0
0
(6500000 – 5500000)
=1000000
5
162500
-162500
350000
0
0
(6500000 – 7250000)
=-750000
6
-19873
-174272
-405855
0
0
(6500000 – 9105000)
=-2605000
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