mheducatio.co On June 15, 2018, Sanderson Construction entered into a long-term

ID: 2557967 • Letter: M

Question

mheducatio.co On June 15, 2018, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington D.C, for $420 million. The expected completion date is April 1, 2020, just in time for the 2020 baseball season, Costs incurred and estimated costs to complete at year end for the life of the contract are as follows ($ in millions Costs incurred during the year Estimated costs to completo as of December 31 $159 6 288 120 Required: d gross profit will Sanderson report in its 2018, 2019, and 2020 Income statements related to this contract assuming Sanderson recognizes revenue over time accor ding to percentage of completion. ompute the revenue and gross profit will Sanderson report in its 2018. 2019, and 2020 income statements related to this contract assuming this project does not qualify for revenue recognition over time. 3. Suppose the estimated costs to complete at the end of 2019 are $200 million instead of $120 million. Compute the amount of revenue and gross profit or loss to be recognized in 2019 using the percentage of completion method Complete this question by entering your answers in the tabs below Required Required 2 Required 3 Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming Sanderson recognizes revenue over time according to percentage of completion. (Enter your answers in millions. Loss amounts should be indicated with a minus sign. Use percentages as calculated and rounded in the table below to arrive at your final answer.) Choose numerator 2018 2019 2020 10000% Prex f Next

Explanation / Answer

Percentage of Completion Method

2018 2019 2020

(A) Costs incurred to date(in Million) $ 50 $ 150 $ 60

Estimated future costs(in Million) $ 200 $ 120 0

(B) Estimated total costs(in Million) $ 250 $ 270 $ 60

(D) Percent Complete (A/B) 20% 55.55% 100%

Percentage Completion

Year

Numerator

Denominator

2018

$ 50

$250

20%

2019

$150

$270

55.55%

2020

$ 60

$60

100%