Answer:
Particulars 2014 2015 2016
Contract Price A 3,900 3,900 3,900
Cost Incurred to date B 300 2,400 4,200
Cost Incurred during the year C 300 2,100 2,100
Estimated total cost E 3,000 4,000 4,200
Percentage complete 10% 60% 100%
Revenue to be recognized G 390 1,950 1,560
Gross Profit/(Loss) H=G-C 90 (150) (540)
<u>Notes</u>
Percentage Complete = Cost Incurred to date / Estimated cost to complete
Gross Profit calculation:
Gross Profit = (Contract Price*Percentage complete) - Revenue previously recognized
<u>Year 2014</u>
10% completed
Revenue recognized = 10% * $ 3,900 = $390.
<u>Year 2015</u>
60% completed
Revenue recognized = 60% * $ 3,900 - $390 (previously recognized) = $1,950.
<u>Year 2016</u>
100% completed.
Revenue recognized = 100% x $3,900 - $390 - $1,950 (previously recognized) = $1,560.
