On January 1, Year 1, a contractor began work on a $3.2 million construction contract that is
Question:
On January 1, Year 1, a contractor began work on a $3.2 million construction contract that is expected to be completed in 3 years. The contractor concludes that it is appropriate to recognize revenue over time using the input method based on costs incurred (cost-to-cost method). At the inception date, the estimated cost of construction was $2.4 million. The following data relate to the actual and expected construction costs:
Year 1 | Year 2 | Year 3 | |
Cost incurred | $720,000 | $1,170,000 | $1,110,000 |
Expected future costs | $1,680,000 | $810,000 | $0 |
For this long-term construction contract, the contractor needs to calculate the estimated dollar values of the revenue and gross profit (loss) to be recognized each year.
Complete the contractor's long-term construction contract using the information above. Enter the appropriate amounts in the associated cells. Indicate losses by using a leading minus (-) sign. Round all amounts to the nearest dollar. If no entry is necessary, enter a zero (0).
Revenue | Gross Profit (loss) | |
Year 1 | ||
Year 2 | ||
Year 3 |
Intermediate Accounting Reporting and Analysis
ISBN: 978-1285453828
2nd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach