Mann Construction Co. uses the percentage-of-completion method of accounting. Du
ID: 2402274 • Letter: M
Question
Mann Construction Co. uses the percentage-of-completion method of accounting. During 20X5, Mann contracts to build an apartment complex for Dan for $30mn. Mann estimates that total costs would amount to $22mn over the period of construction. In connection with this contract, Mann incurs $3mn of construction costs during 20X5. Mann bills and collects $4mn from Dan in 20X5. What amount should Mann recognize as gross profit for 20X5? A. $4,000,000 B. $3,000,000 C. $1,000,000 D. $1,090,909 Fam Construction Company's contract requires the construction of a bridge in three years. The expected total cost of the bridge is $3mn, and Frame will receive $3.80mn for the project. The actual costs incurred to complete the project were $800,000, $900,000, and $1,300,000, respectively, during each of the three years. Progress payments received by Frame were $1,000,000, $1,200,000, and $1,600,000 in each year, respectively. Assuming that the percentage-of-completion method is used, what amount of gross profit should Frame report during the last year of the project? A. $800,000 B. $586,667 C. $346,667 D. $453,333 Mann Construction Co. uses the percentage-of-completion method of accounting. During 20X5, Mann contracts to build an apartment complex for Dan for $30mn. Mann estimates that total costs would amount to $22mn over the period of construction. In connection with this contract, Mann incurs $3mn of construction costs during 20X5. Mann bills and collects $4mn from Dan in 20X5. What amount should Mann recognize as gross profit for 20X5? A. $4,000,000 B. $3,000,000 C. $1,000,000 D. $1,090,909 Fam Construction Company's contract requires the construction of a bridge in three years. The expected total cost of the bridge is $3mn, and Frame will receive $3.80mn for the project. The actual costs incurred to complete the project were $800,000, $900,000, and $1,300,000, respectively, during each of the three years. Progress payments received by Frame were $1,000,000, $1,200,000, and $1,600,000 in each year, respectively. Assuming that the percentage-of-completion method is used, what amount of gross profit should Frame report during the last year of the project? A. $800,000 B. $586,667 C. $346,667 D. $453,333Explanation / Answer
Part 1
Correct Answer (D) $ 1090909
(A)
Total Estimated Cost
$ 22,000,000.00
(B)
Cost Incurred till 20X5
$ 3,000,000.00
(C=B/A)
%of completion
13.64%
(D)
Total Contract Revenue
$ 30,000,000.00
(E=D*C)
Revenue to recognize
$ 4,090,909.09
Less: Cost
$ 3,000,000.00
Gross profit
$ 1,090,909.09
Part 2
Correct Answer (C ) $ 346667.
Year 1
Year 2
Year 3
Contract Price
$ 3,800,000.00
$ 3,800,000.00
$ 3,800,000.00
Less- Estimated Cost
Cost to date
$ 800,000.00
$ 1,700,000.00
$ 3,000,000.00
Cost To complete
$ 2,200,000.00
$ 1,300,000.00
$ -
Total Cost
$ 3,000,000.00
$ 3,000,000.00
$ 3,000,000.00
Gross Profit
$ 800,000.00
$ 800,000.00
$ 800,000.00
Percentage Cpmplete
26.67%
56.67%
100.00%
Revenue
Total Revenue
$ 3,800,000.00
$ 3,800,000.00
$ 3,800,000.00
Percentage
26.67%
56.67%
100.00%
$ 1,013,333.33
$ 2,153,333.33
$ 3,800,000.00
Less-Revenue of Previous Year
$ -
$ 1,013,333.33
$ 2,153,333.33
Current year revenue
$ 1,013,333.33
$ 1,140,000.00
$ 1,646,666.67
Gross profit
Revenue
$ 1,013,333.33
$ 2,153,333.33
$ 3,800,000.00
Cost
$ 800,000.00
$ 1,700,000.00
$ 3,000,000.00
Gross Profit
$ 213,333.33
$ 453,333.33
$ 800,000.00
Less Gross Profit of previous year
$ -
$ 213,333.33
$ 453,333.33
Gross profit To be Recognised in Current Year
$ 213,333.33
$ 240,000.00
$ 346,666.67
Part 1
Correct Answer (D) $ 1090909
(A)
Total Estimated Cost
$ 22,000,000.00
(B)
Cost Incurred till 20X5
$ 3,000,000.00
(C=B/A)
%of completion
13.64%
(D)
Total Contract Revenue
$ 30,000,000.00
(E=D*C)
Revenue to recognize
$ 4,090,909.09
Less: Cost
$ 3,000,000.00
Gross profit
$ 1,090,909.09
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