Exercise 18-33 During 2017, Sheffield Company started a construction job with a
ID: 2414467 • Letter: E
Question
Exercise 18-33 During 2017, Sheffield Company started a construction job with a contract price of $1,580,000. The job was completed in 2019. The following information is available. 2017 2018 2019 Costs incurred to date Estimated costs to complete Billings to date Collections to date $366,300 $802,270 $1,080,000 623,700 296,730 297,000 906,000 1,580,000 270,000 82,000 1,427,000 Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used. Gross profit recognized in 2017 Gross profit recognized in 2018 Gross profit recognized in 2019 sExplanation / Answer
2017
2018
2019
Contract Price
1580000
1580000
1580000
Costs to date
366300
802270
1080000
Estimated cost to go
623700
296730
----
Total Estimated cost
990000
1099000
1080000
% complete
(366300/990000) * 100
=37%
(802270/1099000) * 100
=73%
100%
Revenue to date
(1580000 * 37%)
=584600
(1580000 * 73%)
=1153400
1580000
Less: Revenue from previous period
0
584600
1153400
Revenue this year
584600
568800
426600
Gross Profit to date
(584600 – 366300)
=218300
(1153400 – 802270)
=351130
(1580000 – 1080000)
=500000
Less:Gross profit from previous year
0
218300
351130
Gross Profit this year
218300
132830
148870
Account Titles & Explanation
Debit
Credit
Construction in Process (802270 – 366300)
435970
Account Payable
435970
(To record cost of construction)
Account Receivable (906000 – 297000)
609000
Billings
609000
(To record progress billing)
Cash (802000 – 270000)
532000
Account Receivable
532000
(To record collections)
Construction in Process
132830
Construction Exp
435970
Construction Revenue
568800
(To recognize revenue)
Completed contract method:-
2017
2018
2019
Gross Profit
0
0
(1580000 – 1000000)
=500000
2017
2018
2019
Contract Price
1580000
1580000
1580000
Costs to date
366300
802270
1080000
Estimated cost to go
623700
296730
----
Total Estimated cost
990000
1099000
1080000
% complete
(366300/990000) * 100
=37%
(802270/1099000) * 100
=73%
100%
Revenue to date
(1580000 * 37%)
=584600
(1580000 * 73%)
=1153400
1580000
Less: Revenue from previous period
0
584600
1153400
Revenue this year
584600
568800
426600
Gross Profit to date
(584600 – 366300)
=218300
(1153400 – 802270)
=351130
(1580000 – 1080000)
=500000
Less:Gross profit from previous year
0
218300
351130
Gross Profit this year
218300
132830
148870
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