please, ((Bhawna)), don\'t try answer them, because your last answer was incorre
ID: 2448307 • Letter: P
Question
please, ((Bhawna)), don't try answer them, because your last answer was incorrect
On February 1, 2016, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,420,000. During 2016, costs of $2,140,000 were incurred with estimated costs of $4,140,000 yet to be incurred. Billings of $2,640,000 were sent and cash collected was $2,390,000.
In 2017, costs incurred were $2,640,000 with remaining costs estimated to be $3,810,000. 2017 billings were $2,890,000 and $2,615,000 cash was collected. The project was completed in 2018 after additional costs of $3,940,000 were incurred. The company’s fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage of completion.
On February 1, 2016, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,420,000. During 2016, costs of $2,140,000 were incurred with estimated costs of $4,140,000 yet to be incurred. Billings of $2,640,000 were sent and cash collected was $2,390,000.
In 2017, costs incurred were $2,640,000 with remaining costs estimated to be $3,810,000. 2017 billings were $2,890,000 and $2,615,000 cash was collected. The project was completed in 2018 after additional costs of $3,940,000 were incurred. The company’s fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage of completion.
Required: 1. Compute the amount of revenue and gross profit or loss to be recognized in 2016, 2017, and 2018 using the percentage-of-completion method? 2016 2017 2018 Estimated total gross profit (loss) Actual total gross profit (loss) Percentages of completion Choose numerator Choose denominator % complete to date 2016 2017 2018 0 100.0000%Explanation / Answer
Year 2016
% of Completion = 2,140,000 / 4,140,000 = 0.5169 i.e. 51.69 %
Revenue from contract = (Contract price * % of completion) - Revenue previously recognized
= (8,420,000 * 51.69 %) - NIL
= $ 4352298 ( This is to be recognized during year 2016 as Revenue from contract)
Contract profit to be recognized during year 2016 = Revenue - cumulative cost incurred
= 4352298 - 2140000 = $ 2212298
Year 2017
% of Completion = 2640000 / 3810000 = 0.6929 i.e. 69.29 %
Revenue from contract = (Contract price * % of completion) - Revenue previously recognized in year 2016
= (8,420,000 * 69.29 %) - 4352298
= $ 1481920 ( This is to be recognized during year 2017 as Revenue from contract)
Contract profit to be recognized during year 2017 = Revenue - Cumulative cost incurred
= (8,420,000 * 69.29%) - (2640000 + 2140000)
= $ 1054218
Year 2018
Contract profit/(Loss) to be recognized during year 2018 = 8420000 - (2140000 + 2640000 +3940000)
= (300000)
Revenue from contract = (Contract price * % of completion) - Revenue previously recognized
= (8420000 * 100 %) - (4352298 + 1481920)
= $ 2585782 ((This is to be recognized during year 2018 as Revenue from contract)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.