Answer:
Key figures:
2016:
Revenue = $270,000
Expenses = $202,500
Income = $67,500
2017:
Revenue = $450,000
Expenses = $337,500
Income = $112,500
2018:
Revenue = $180,000
Expenses = $135,000
Income = $45,000
Explanation:
Under this method, percentage of work completed is determined using the following <u>formula:</u>
<em>Percentage of work completed = (Total Expenses incurred on the project till the close of the accounting period) ÷ (Total Estimated Cost of the Contract)</em>
Total estimated cost = $202,500 + $337,500 + $135,000 = $675,000
<u>2016:</u>
Percentage of work completed = ($202,500 ÷ $675,000)×100 = 30%
Expenses in 2016 = $202,500 (answer)
Revenue in 2016 = $900,000 × 30% = $270,000 (answer)
Income in 2016 = Revenue - Expenses
Income in 2016 = $270,000 - $202,500
Income in 2016 = $67,500 (answer)
<u>2017:</u>
Percentage of work completed = ($337,500 ÷ $675,000)×100 = 50%
Expenses in 2017 = $337,500 (answer)
Revenue in 2017 = $900,000 × 50% = $450,000 (answer)
Income in 2017 = Revenue - Expenses
Income in 2017 = $450,000 - $337,500
Income in 2017 = $112,500 (answer)
<u>2018:</u>
Percentage of work completed = ($135,000 ÷ $675,000)×100 = 20%
Expenses in 2018 = $135,000 (answer)
Revenue in 2018 = $900,000 × 20% = $180,000 (answer)
Income in 2018 = Revenue - Expenses
Income in 2018 = $180,000 - $135,000
Income in 2018 = $45,000 (answer)
