Shumpert, Inc., entered into a contract that was to take two years to complete, with an estimated cost of $900,000. The contract price was $1,300,000. Costs of the contract for 2019, the first year, totaled $675,000.What was the gross profit reported by the percentage of completion method for 2019?After the contract was completed at the end of 2020 at a total cost of $950,000, what was the gross profit reported by the percentage of completion method for 2020?

Given: 2019 2020 Contract Price 1,300,000 Costs incurred 675,000 275,000 Under…

Answered: Shumpert, Inc., entered into a contract…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Shumpert, Inc., entered into a contract that was to take two years to complete, with an estimated cost of $900,000. The contract price was $1,300,000. Costs of the contract for 2019, the first year, totaled $675,000.

What was the gross profit reported by the percentage of completion method for 2019?
After the contract was completed at the end of 2020 at a total cost of $950,000, what was the gross profit reported by the percentage of completion method for 2020?

Expert Solution

Step 1

Given:

	2019	2020
Contract Price		1,300,000
Costs incurred	675,000	275,000

Under the Percentage of completion method, contract completion (%) is calculated to recognize the revenue.

In this case, the 2-year contract is 75% complete in the 1st year as shown in the next step.

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