Problem 18-10 On March 1, 2017, Sheridan Construction Company contracted to cons
ID: 2343134 • Letter: P
Question
Problem 18-10 On March 1, 2017, Sheridan Construction Company contracted to construct a factory building for Fabrik Manufacturing Inc. for a total contract price of $8,340,000. 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 $2,726,200 $2,566,300 $1,957,500 2019 Contract costs incurred during the year Estimated costs to complete the contract at 12/31 Billings to Fabrik during the year 3,613,800 1,957,500 -0 3,180,0003,490,000 1,670,000 (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 o, please enter o. Do not leave any fields blank.) 2017Explanation / Answer
(a) 2017 Cost to date $ 27,26,200 Add: Estimated cost to complete $ 36,13,800 Estimated total cost $ 63,40,000 Percent complete ($27,26,200 / $63,40,000) 43% Revenue recognized ($83,40,000 X 43%) $ 35,86,200 Less: Cost incurred 2017 $ 27,26,200 Profit/ (loss) recognized in 2017 $ 8,60,000 2018 Cost to date ($27,26,200 + $25,66,300) $ 52,92,500 Estimated cost to complete $ 19,57,500 Estimated total cost $ 72,50,000 Percent complete ($52.92,500 / $72,50,000) 73% Revenue recognized [($83,40,000 X 73%) - $35,86,200] $ 25,02,000 Less: Cost incurred in 2018 $ 25,66,300 Profit/ (loss) recognized in 2018 $ -64,300 2019 Total Revenue recognized $ 83,40,000 Cost incurred $ 72,50,000 Total profit on contract $ 10,90,000 Less: Profit previously recognized ($8,60,000 - $64,300) $ 7,95,700 Profit/ (loss) recognized in 2019 $ 2,94,300 (b) 2017 0 2018 0 2019 $ 10,90,000 Note: Under complete contract method profit will be recognized on completion on contract only. 2019 Total Revenue recognized $ 83,40,000 Less: Cost incurred $ 72,50,000 Total profit on contract $ 10,90,000