Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On June 15, 2018, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $260 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 $260 million. The expected completion date is April 1, 2020, just in time for the 2020 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions):

2018 2019 2020
Costs incurred during the year $ 60 $ 80 $ 65
Estimated costs to complete as of December 31 140 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 $110 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.

Required 1

Required 2

Required 3

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. (Enter your answers in millions. Loss amounts should be indicated with a minus sign. Use percentages as calculated and rounded in the table below to arrive at your final answer.)

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. (Enter your answers in millions. Loss amounts should be indicated with a minus sign. Use percentages as calculated and rounded in the table below to arrive at your final answer.)

Show less

Percentages of completion
Choose numerator Choose denominator = % complete to date
Actual costs to date Estimated total costs
2018 $60 $200 = 30.00%
2019 $140 $200 = 70.00%
2020 100.00%
2018
To date Recognized in prior years Recognized in 2018
Construction revenue $78 $78 $55
Construction expense $60 $60 $(40)
Gross profit (loss) $18 $18 $15
2019
To date Recognized in prior years Recognized in 2019
Construction revenue $182 $182 $92
Construction expense $140 $140 $(80)
Gross profit (loss) $42 $42 $12
2020
To date Recognized in prior years Recognized in 2020
Construction revenue $260 $260 $73
Construction expense $205 $205 $(50)
Gross profit (loss)

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. (Enter your answers in millions. Loss amounts should be indicated with a minus sign.)

Year Revenue recognized Gross Profit (Loss) recognized
2018 $0 million $0 million
2019 $0 million $0 million
2020 $260 million $55 million

Suppose the estimated costs to complete at the end of 2019 are $110 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. (Enter your answers in millions. Use percentages as calculated and rounded in the table below to arrive at your final answer.)

Percentages of completion
Choose numerator Choose denominator = % complete to date
Actual costs to date Estimated total costs
2019 $140 $250 = 56.00%
2019
To date Recognized in prior Years Recognized in 2019
Construction revenue $78 $(78)
Construction expense $140 $140 $0
Gross profit (loss) $140 $(140)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles Of Food Beverage And Labor Cost Controls

Authors: Paul R. Dittmer, J. Desmond Keefe III

9th Edition

0471783471, 978-0471783473

More Books

Students also viewed these Accounting questions

Question

5 What does it mean to think of an organisation as an open system?

Answered: 1 week ago