Question
On June 15, 2018, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $400 million. The expected
On June 15, 2018, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $400 million. The expected completion date is April 1, 2020, just in time for the 2020 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions):
2018 | 2019 | 2020 | |||||||
Costs incurred during the year | $ | 60 | $ | 130 | $ | 55 | |||
Estimated costs to complete as of December 31 | 190 | 60 | |||||||
Required: 1. Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming Sanderson recognizes revenue over time according to percentage of completion.
2. Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming this project does not qualify for revenue recognition over time.
3. Suppose the estimated costs to complete at the end of 2019 are $190 million instead of $60 million. Compute the amount of revenue and gross profit or loss to be recognized in 2019 using the percentage of completion method.
Percentages of completion Choose numerator Choose denominator % complete to date = Estimated total costs Actual costs to date $ 2018 60 2019 190 0 2020 100.00% 2018 Recognized in prior years To date Recognized in 2018 0 $ Construction revenue $ Construction expense 0 $ $ 60 60 Gross profit (loss) 0 $ $ 2019 Recognized in prior years To date Recognized in 2019 Construction revenue $ 60 $ Construction expense 130 190 Gross profit (loss) O 2019 Recognized in prior years To date Recognized in 2019 Construction revenue $ 0 Construction expense $ $ 190 60 130 $ Gross profit (loss) 0 2020 Recognized in prior years To date Recognized in 2020 Construction revenue $ 0 Construction expense $ 0 Gross profit (loss) $ 0 EA EAEA amounts should be indicated with a minus sign.) Gross Profit (Loss) recognized Revenue Year recognized 2018 million million 2019 million million 2020 million million Reauired 1 Suppose the estimated costs to complete at the end of 2019 are $190 million instead of $60 million. Compute the an revenue and gross profit or loss to be recognized in 2019 using the percentage of completion method. (Enter your a millions. Use percentages as calculated and rounded in the table below to arrive at your final answer.) Percentages of completion Choose denominator Choose numerator % complete to date 2019 0 2019 Recognized in prior Years To date Recognized in 2019 Construction revenue $ 0 Construction expense Gross profit (loss) 0 EAEAStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started