5. Calculate the amount of revenue and gross profit (loss) to be recognized in e
ID: 2538385 • Letter: 5
Question
5. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)
UPDATE: Contract price is $10,000,000
2018 2019 2020 Cost incurred during the year $ 2,184,000 $ 3,860,000 $ 4,080,000 Estimated costs to complete as of year-end 5,616,000 4,220,000 0 2018 2019 2020 Revenue Gross profit (loss)UPDATE: Contract price is $10,000,000
Explanation / Answer
2018 2019 2020
Contract Price 10,000,000 10,000,000 10,000,000
Cost incurred (a) 2,184,000 3,860,000 4,080,000
Estimated cost to complete (b) 5,616,000 4,220,000 0
Total Estimated cost (a+b) 7,800,000 8,080,000 4,080,000
Revenue Recongnition:
2018: (2,184,000 / 7,800,000) * 100 = 28% * 10,000,000 = $2,800,000 Ans.
2019: (3,860,000 / 8,080,000) * 100 = (47.77% * 10,000,000) - 2,800,000 = $1,977,000 Ans.
2020: 10,000,000 - (2,800,000 + 1,977,000) = $5,223,000 Ans.
Gross profit (loss) recognition:
2018: 2,800,000 - 2,184,000 = $616,000 Ans.
2019: 1,977,000 - (3,860,000 - 2,184,000) = $301,000 Ans.
2020: 5,223,000 - (4,080,000 - 3,860,000) = $5,003,000 Ans.
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