Required information The following information applies to the questions displaye

Question

Required information The following information applies to the questions displayed below [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 $1,770,000. The project was begun in 2017 and completed in 2018. Cost and other data are presented below: 2017 2018 Costs incurred during the year Estimated costs to complete Billings during the year Cash collections during the yeaz $396,000 $1,070,000 924,000 490,000 1,280,000 390,000 1,435,000 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. Amount of gross profit recognized in 2017 Amount of gross profit recognized in 2018

Explanation / Answer

Calculate gross profit :

Amount of gross profit recongnized in 2017 = $135000

Amount of gross profit recongnized in 2018 = $565000

2017 2018 Percentage completion 396000*100/1320000=30% 100% Contract sales 1770000*30%=531000 1770000 Less: Contract cost 396000 1070000 profit 135000 700000 Prior year gross profit 0 (135000) Gross profit 135000 565000

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