Problem 2

On February 1, 2017, Tanks A Lot obtained a contract to build a large municipal aquarium. The aquarium was to be built at a total cost of $5,400,000 and was scheduled for completion by September 1, 2019. One clause of the contract stated that Tanks A Lot was to deduct $15,000 from the $6,600,000 billing price for each week that completion was delayed. Completion was delayed 6 weeks, which resulting in a $90,000 penalty. Tanks A Lot uses the percentage of completion method to account for revenue. Below are the data pertaining to the construction period:

	2017	2018	2019
Costs incurred during year	1,782,000	2,068,000	1,650,000
Estimated costs to complete	3,618,000	1,650,000	0
Progress billings to date	1,200,000	3,100,000	6,510,000
Cash collected to date	1,000,000	2,800,000	6,510,000

Calculate the total revenue recognized, total expenses recognized, and total gross profit recognized in each year.

Hints:

• For revenue: calculate the percentage complete the project is each year based on the costs incurred to date in comparison to total estimated costs for the project and apply it to total revenue for the project
• For gross profit: subtract the current year costs from the current year revenue

For years 2018 and 2019: consider what was recorded before