FINANCIAL ACCOUNTING
6th Edition
ISBN: 9781618533111
Author: DYCKMAN
Publisher: Cambridge Business Publishers
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Sandhill Construction, which follows ASPE entered into a contract to construct a bridge for a contract price of $2.8 million.
Construction began in 2022 and was completed in 2024. Below are the details of the transactions related to the contract:
Costs incurred during the year
Estimated costs to complete
Revenue
Expenses
$
Gross Profit $
2022
2022
$637,000
1,489,000
$844,000
Calculate the gross profit to be recognized each year using the completed-contract method.
2023
$
$
713,000
2024
$715,900
2023
0
$
$
2024
SUPPORT
A&B Construction enters into a contract to construct a bridge for $1,400,000. At the outset, A&B estimates that it will
cost $1,200,000 to build the bridge. Actual costs in 2017 are $540,000. Actual costs in 2018 are less than expected and
amount to $600,000. The profits reported under the completed contract and percent of completion methods for each
year would be:
Select one:
Completed Contract
Percentage of Completion
○ a.
2017
2018
2017
2018
$0
$200,000
$90,000
$170,000
O b.
Completed Contract
Percentage of Completion
2017
2018
2017
2018
$0
$260,000
$90,000
$170,000
Completed Contract
Percentage of Completion
2017
2018
2017
$0
$260,000
$123,000
2018
$197,000
○ d.
Completed Contract
Percentage of Completion
2017
2018
2017
$0
$260,000
$90,000
2018
$110,000
GinebraCorporation recognizes construction revenue and cost using the percentage of completion method. During 2021, a single long-term project was begun which continued through 2021. Information on the project follows:
2021. 2022
Partial billing on contract 1,000,000. 4,200,000
Accounts receivable 1,000,000 3,000,000
Construction cost 1,050,000 1,920,000
Construction in progress 1,220,000 3,640,000
What is the gross profit recognized from this long-term construction contract in year 2021 and 2022, respectively?
2021 2022
A.220,000. 2,280,000
B.170,000. 500,000
C.220,000. 1,000,000
D.170,000. 1,280,000
Chapter 6 Solutions
FINANCIAL ACCOUNTING
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