antine Company is a large real estate construction company that has made a Subchapter S election. The company reports its income g the percentage of completion method. In 2019, the company completed a contract at a total cost of $10,000,000. The contract price $13,500,000. At the end of 2018, the year the contract was begun, Byzantine estimated the total cost of the contract would be 000,000. Total accumulated cost on the contract at the end of 2018 was $6,500,000. relevant tax rate is 35%, and the relevant Federal interest rate is 4%. Assume that all income tax returns were filed and taxes were on March 15 following the end of the calendar tax year. parts (a) and (b), round any division to 2 decimal places. If required, round your final answer to the nearest dollar. The gross profit on the contract for 2018 is The lookback interest due with the 2019 return is and for 2019 is Before bidding on a contract, Byzantine generally makes three estimates of total contract costs: (1) optimistic, (2) pessimistic, and (3) st likely (based on a blending of optimistic and pessimistic assumptions). The company has asked you to write a letter explaining which hese estimates should be used for percentage of completion purposes. In writing your letter, you should consider the fact that Byzantine ncorporated and has made an S corporation election. Therefore, the income and deductions flow through to the shareholders who are all viduals in the 35% marginal tax bracket. und the interest equivalent to four decimals places before converting to a percentage. Byzantine Company is a large real estate construction company that has made a Subchapter S election. The company reports its income using the percentage of completion method. In 2019, the company completed a contract at a total cost of $10,000,000. The contract price was $13,500,000. At the end of 2018, the year the contract was begun, Byzantine estimated the total cost of the contract would be $12,000,000. Total accumulated cost on the contract at the end of 2018 was $6,500,000. The relevant tax rate is 35%, and the relevant Federal interest rate is 4%. Assume that all income tax returns were filed and taxes were paid on March 15 following the end of the calendar tax year. For parts (a) and (b), round any division to 2 decimal places. If required, round your final answer to the nearest dollar a. The gross proft on the contract for 2018 is and for 201915 and for 2019 is b. The lookback interest due with the 2019 return is c. Before bidding on a contract, Byzantine generally makes three estimates of total contract costs: (1) optimistic, (2) pessimistic, and (3) most likely (based on a blending of optimistic and pessimistic assumptions). The company has asked you to write a letter explaining which of these estimates should be used for percentage of completion purposes. In writing your letter, you should consider the fact that Byzantine is incorporated and has made an S corporation election. Therefore, the income and deductions flow through to the shareholders who are all individuals in the 35% marginal tax bracket. Round the interest equivalent to four decimals places before converting to a percentage
