Please can you assist and give details explanation, so I can understand. Thank y

Question

Please can you assist and give details explanation, so I can understand.
Thank you. Question 1 Penner Builders contracted to build a high-rise for $29,200,000. Construction began in 2018 and is expected to be completed in 2020. Data for 2018 and 2019 are: 2018 2019 Costs incurred to date Estimated costs to complete 14,880,000 10,176,000 Penner uses the percentage-of-completion method. $3,720,000 $11,024,000 How much gross profit should be reported for 20187 Gross profit $ 2120000 SHOW LIST OF ACCDUNTS How much gross profit should be reported for 2019 Gross profit $ 2040000

Explanation / Answer

Gross profit for 2018 = (Costs incurred to date / Total Estimated costs) x Estimated profit
= {$3,720,000 / ($14,880,000 + $3,720,000)} x ($29,200,000 - $14,880,000 + $3,720,000)
= $2,120,000

Gross profit for 2019 = {(Costs incurred to date / Total Estimated costs) x Estimated profit } - Gross profit in 2018
= {$11,024,000 / ($11,024,000 + $10,176,000)} x ($29,200,000 - 11,024,000 + $10,176,000)
= $4,160,000 - $2,120,000 = $2,040,000

Account Titles and Explanation Debit Credit Construction in Process $2,040,000 Construction Expenses ($11,024,000 - $3,720,000) $7,304,000   Revenue from Long-Term Contracts $9,344,000

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