2017 2018 2019 2017 Cost to Date (12/31/17) 2018 Percent complete 2019 Less On M
ID: 2563281 • Letter: 2
Question
2017
2018
2019
2017
Cost to Date (12/31/17)
2018
Percent complete
2019
Less
On March 1, 2017, Sheffield Construction Company contracted to construct a factory building for Fabrik Manufacturing Inc. for a total contract price of $8,330,000. The building was completed by October 31, 2019. The annual contract costs incurred, estimated costs to complete the contract, and accumulated billings to Fabrik for 2017, 2018, and 2019 are given below:2017
2018
2019
Contract costs incurred during the year $2,671,200 $2,193,000 $2,395,800 Estimated costs to complete the contract at 12/31 3,688,800 2,395,800 –0– Billings to Fabrik during the year 3,170,000 3,510,000 1,650,000(a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2017, 2018, and 2019. (Ignore income taxes.) (If answer is 0, please enter 0. Do not leave any fields blank.)
2017
Cost to Date (12/31/17)
$2671200
Estimated Cost to Complete
3688800
Total Cost
$633600
Percent to complete
42
%Revenue Recognized
$2698600 (incorrect)
Costs Incurred
2671200
Profit/ Loss Recognized in 2017
$27400 (inorrect)
2018
Costs to date (12/31/18)
$4864200
Estimated Costs to Complete
2385800 (incorrect)
Estimated Total Costs
$7250000
(incorrect)Percent complete
67
%Revenue Recognized in 2018
$2082500
Costs Incurred in 2018
2193000
Profit / (Loss) Recognized in 2018
$(110500)
2019
total Costs Incurred
$(INCORRECT)
Profit Previously RecognizedTotal Costs IncurredProfit / (Loss) Recognized in 2019Total Revenue RecognizedTotal Profit on ContractEAT_1364799800488_0_2561446869231341 (INOCRRECT)
(INCORRECT)
Total Profit on ContractProfit / (Loss) Recognized in 2019Profit Previously RecognizedTotal Costs IncurredTotal Revenue RecognizedEAT_1364799800488_0_5460163114080155 (INCORRECT
2748900 (INCORRECT)
Less
:Profit / (Loss) Recognized in 2019Total Revenue RecognizedTotal Costs IncurredTotal Profit on ContractProfit Previously RecognizedEAT_1364799800488_0_2561446869231341 (INCORRECT)
(INCORRECT
Profit. (Loss) Recognized in 2019
$353100
(b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2017, 2018, and 2019. (Ignore income taxes.) (If answer is 0, please enter 0. Do not leave any fields blank. Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
2017 $
0
2018 $0
2019 $1070000
Explanation / Answer
(a) 2017
Cost incurred upto date = $2671200
Estimated cost to complete the contract = $3688800
Total cost = $6360000
Percentage of completion = 2671200÷6360000 =42%
Revenue to be recognised = total contract value × 42%
= 8330000×42% = $3498600
- cost incurred upto date =$2671200
= profit to be recognised = $827400
2018
Cost incurred upto date = 2671200+2193000 = $4864200
Estimated cost of completion = 2395800
Total cost = $7260000
Percentage of completion = 4864200÷7260000 = 67%
Revenue to be recognised = $8330000×67% = $5581100
- cost incurred upto date = $4864200
= profit to be recognised = $716900
(-) profit recognised in earlier year = $827400
= profit to be recognised in 2018 = ($110500)
2019
cost incincurred upto date= $7260000
Contract revenue =$8330000
Percentage of completion = 100%
Revenue to be recognised =8330000
-) cost = $7260000
= profit on contract = $1070000
(-) profit recognised in earlier years = $716900
= profit to be recognised in 2019 = $353100
(b) Revenue under completed contract method will be recognised only in the year in which contract gets completed.
So in 2019 revenue will be recognised as under
Total revenue = $8330000
(-) total cost = $7260000
= profit = $1070000
And in 2017 and 2018, no profit will be recognised as the contract is not completed.
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