Problem 18-10 On March 1, 2017, Pechstein Construction Company contracted to con
ID: 2540308 • Letter: P
Question
Problem 18-10 On March 1, 2017, Pechstein Construction Company contracted to construct a factory building for Fabnik Manufacturing Inc. for a total contract price of 18,400,000. 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 201 $2.880,000 $2,230,000 $2,190,000 2019 Contract costs incurred during the year Estimated costs to complete the contract at 3,520,000 2,190,000 3,200,000 3,500,000 1,700,000 12/31 Bilings to Fabrik during the year (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.) (tf answer is 0, please enter o. Do not leave any fieids blank.) 2017 2018 2019 (b) Using the completed-contract method, prepare schedules to compute the proft or loss to be recognized as a result of this contract for the years ended December 31, 2017, 2018, and 2019. (Ignore income taxes.) (IM answer is 0, please enter 0. Do not leave any fields blank. Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g.(45)) 2017 2018 s 2019 Question Attempts: UnlimExplanation / Answer
A 2017 a Cost to date 2,880,000 b Estimated Cost to Complete 3,520,000 c=a+b Estimated total costs 6,400,000 d=a/c Percentage of Completion 45% e=8400000*d Revenue Recognized 3,780,000 (8400000*45%) f=a Cost incurred 2,880,000 g=e-f Profit recognized in 2017 900,000 2018 h Cost to date 5,110,000 (2880000+2230000) i Estimated Cost to Complete 2190000 j=h+i Estimated total costs 7,300,000 k=h/j Percentage of Completion 70% l Revenue Recognized 2100000 =8400000*(70-45)% m Cost incurred 2230000 n=l-m Profit recognized in 2018 -130000 2019 o Cost to date 7,300,000 (2880000+2230000+2190000) p Estimated Cost to Complete 0 q=o+p Estimated total costs 7,300,000 r=o/q Percentage of Completion 100% s Revenue Recognized 2520000 =8400000*(100-70)% t Cost incurred 2190000 u=s-t Profit recognized in 2019 330000 B 2017 0 2018 0 2019 1,100,000 (8400000-7300000) In completed contract method entire profit of the project is recognised in the year of completion.