Answer:
Blossom Construction Company
The gross profit that should be recognized in 2021 is:
= $5,500,000.
Explanation:
a) Data and Calculations:
Contract price = $47,500,000
Others:
Billings during the year $21,500,000
Collections during the year $10,500,000
Costs incurred during the year $22,000,000
Estimated costs to complete as of December 31 $16,000,000
Total estimated costs to complete = $38,000,000 ($22 + $16 million)
2021 Revenue = $22/$38 * $47.5 = $27,500,000
Costs incurred during the year = 22,000,000
Gross profit to be recognized = $5,500,000
b) The percentage-of-completion method of accounting for long-term contract measures the percentage of costs incurred in each year against the contract price to determine the revenue which can be attributed to the year.
