Supplier Corp. enters into a government contract during the year to provide computer equipment for $3,200,000. Thecontract consists of a single performance obligation to provide specified equipment in three years. Total costs estimated bySupplier Corp. for the contract are $2,240,000. The equipment is highly specialized and has no alternative uses. Asnegotiated in the contract, any costs incurred by Supplier Corp. plus a specified profit margin will be paid to Supplier Corp.in the event of a contract cancellation. Actual costs incurred during the first year of the contract were $1,024,000 includingunexpected cost overruns of $128,000 due to labor inefficiencies.Assume that at the end of the second year of the contract, the estimate of total costs has increased to $2,400,000 milliondue to an increase in cost of materials. Actual costs incurred to date are $1,800,000, excluding year one inefficiencies.a. Calculate (1) recognized revenue, (2) the gross profit, and (3) adjusted contract margin to be recorded in the second yearof the contract.1 Recognized revenue$2 Gross profit$3 Adjusted contract margin $000b. Calculate (1) cumulative recognized revenue, (2) cumulative gross profit, and (3) cumulative adjusted contract margin atthe end of the second year of the contract.1 Cumulative recognized revenue$2 Cumulative gross profit$3 Cumulative adjusted contract margin $Check000K

Revenue Recognition means the recording of revenues of an entity in its books. It is an accrual…

r Corp. for the contract are $2,240,000. The equipment is highly specialized and has no alte ted in the contract, any costs incurred by Supplier Corp. plus a specified profit margin will b vent of a contract cancellation. Actual costs incurred during the first year of the contract we cted cost overruns of $128,000 due to labor inefficiencies. e that at the end of the second year of the contract, the estimate of total costs has increases an increase in cost of materials. Actual costs incurred to date are $1,800,000, excluding year late (1) recognized revenue, (2) the gross profit, and (3) adjusted contract margin to be reco ontract. gnized revenue $ s profit $ sted contract margin $ 0 0 0

r Corp. for the contract are $2,240,000. The equipment is highly specialized and has no alte ted in the contract, any costs incurred by Supplier Corp. plus a specified profit margin will b vent of a contract cancellation. Actual costs incurred during the first year of the contract we cted cost overruns of $128,000 due to labor inefficiencies. e that at the end of the second year of the contract, the estimate of total costs has increases an increase in cost of materials. Actual costs incurred to date are $1,800,000, excluding year late (1) recognized revenue, (2) the gross profit, and (3) adjusted contract margin to be reco ontract. gnized revenue $ s profit $ sted contract margin $ 0 0 0

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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