Answer:
Check the explanation
Explanation:
Contract price = 17,400,000
Gross profit under percentage of completion method =
[(costs incurred to date / estimated total costs) * estimated profit] - previously recognized profit
Gross profit in 2017 =
[4,500,000 / 12,000,000(4,500,000 + 7,500,000) * 5,400,000(17,400,000 - 12,000,000)] = 2,025,000
Gross profit in 2018 =
[7,920,000 / 13,200,000(7,920,000 + 5,280,000) * 4,200,000(17,400,000 - 13,200,000)] - 2,025,0000 = 495,000
Gross profit in 2019 =
[13,800,000 / 13,800,000 * 3,600,000] - 2,025,000 - 495,000 = 1,080,000
Under the completed contract method Gross profit is recognized only in the year of completion.
Gross profit in 2017 = 0
Gross profit in 2018 = 0
Gross profit in 2019 = 17,400,000 - 13,800,000 = 3,600,000
