Beavis Construction Company was the low bidder on a construction project to buil
ID: 2348560 • Letter: B
Question
Beavis Construction Company was the low bidder on a construction project to build an earthen dam for $1,800,000. The project was begun in 2012 and completed in 2013. Cost and other data are presented below: Cost incurred during the year 2012 - $450,000 Cost incurred during the year 2013 - $1,100,000 Estimated cost to comple 2012 - $1,050,000 Estimated cost to comple 2013 - $0 Billing during the year 2012 - $400,000 Billing during the year 2013 - $1,400,000 Cash collected during the year 2012 - $300,000 Cash collected during the year 2013 - $1,500,000 Assume that Beavis uses the percentage-of-completion method for revenue recognition. Required: Compute the amount of gross profit recognized during 2012 and 2013.Explanation / Answer
2012:
Contract price
$1,800,000
Actual costs to date
$450,000
Estimated costs to complete
1,200,000
Total estimated project costs
1,650,000
Estimated total gross profit
150,000
Percentage of completion:
$450,000/ $1,650,000
27.27%
Gross profit recognized
$40,905
2013:
Contract price
$1,800,000
Costs incurred: 2012
$450,000
2013
1,100,000
Total cost
1,550,000
Total gross profit
250,000
Recognized in 2012
40,905
Recognized in 2013
$ 209,095
2012:
Contract price
$1,800,000
Actual costs to date
$450,000
Estimated costs to complete
1,200,000
Total estimated project costs
1,650,000
Estimated total gross profit
150,000
Percentage of completion:
$450,000/ $1,650,000
27.27%
Gross profit recognized
$40,905
2013:
Contract price
$1,800,000
Costs incurred: 2012
$450,000
2013
1,100,000
Total cost
1,550,000
Total gross profit
250,000
Recognized in 2012
40,905
Recognized in 2013
$ 209,095