Required information [The following information applies to the questions display

Question

Required information [The following information applies to the questions displayed below.] Beavis Construction Company was the low bidder on a construction project to build an earthen dam for $1,780,000. The project was begun in 2017 and completed in 2018. Cost and other data are presented below: 2017 2018 Costs incurred during the year $ 458,500 $ 1,080,000 Estimated costs to complete 851,500 0 Billings during the year 495,000 1,285,000 Cash collections during the year 395,000 1,440,000 Assume that Beavis recognizes revenue on this contract over time according to percentage of completion.

Required: Compute the amount of gross profit recognized during 2017 and 2018.

Explanation / Answer

Contract Value 1780000 2017 2018 A Cost incurred 458500 1080000 B Estimated Cost to complete 851500 0 C Total Estmated Cost of Contract (A+B) 1310000 1538500 (458500+1080000) % of Completion (A / C) 35% 100% Gross Profit 470000 77000 (1780000-1310000) (1780000-1538500- 164500) Gross Profit recognised as per % of Completion method (470000*35%) 164500 77000

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