Question

Computing Revenues under Long-Term ContractsCamden Corporations agreed to build a warehouse for a client at an agreed contract price of $ 900,000. Expected (and actual) costs for the warehouse follow: 2016, $202,500; 2017, $337,500; and 2018, $135,000. The company completed the warehouse in 2015. Compute revenues, expenses, and income for each year 2016 through 2018, and for all three years combined, using the cost-to-cost method.Cost-to-Cost Method% of total Costs expected Revenue Year incurred costs recognized Income2016 $Answer Answer% $Answer $Answer2017 Answer Answer% Answer Answer2018 Answer Answer% Answer AnswerTotal $Answer $Answer $Answer

Answer 1

Answer and Explanation:

Computation:

                              Cost-to-cost method                    

Year      Cost        cost(%)     Revenue       Income    

2016   $202,500 30%        $270,000      $67,500

2017   $337,500 50%        $450,000      $112,500

2018   $135,000 20%        $180,000       $45,000    

Total   $675,000    100%      $900,000      $225,000

Cost % = Cost of particular year / Total cost

Revenue:

Year 2016 =$900,000 × 30% = $270,000

Year 2017 = $900,000 × 50% = $450,000

Year 2018 = $900,000 × 20% = $180,000.

Income:

= Revenue - Cost

 Year 2016 = $270,000 - $202,500

Year 2017 = $450,000  - $337,500

Year 2018 = $180,000 - $135,000