Question

Shumpert, Inc., entered into a contract that was to take two years to complete, with an estimated cost of $900,000. The contract price was $1,300,000. Costs of the contract for 2018, the first year, totaled $675,000.
a. What was the gross profit reported by the percentage of completion method for 2016?
b. After the contract was completed at the end of 2017 at a total cost of $950,000, what was the gross profit reported by the percentage of completion method for 2017?

Answer 1

Answer:

Answer for Part A and Part B is as follows:

Particulars                                                 2016 year                          2017 year

Contract Price                                              $13,00,000                      $13,00,000

Cost that has been incurred                            $675000                        $950000

Estimated cost to complete                         $225000                                 $0

TOTAL COST                                              $900000                             $950000

Expected Gross profit                                     $400000                         $350000

Percentage that is completed                   75 percent                       100percent

Gross profit to be recognised                         $300000                      $50000

Note: Calculations have been made according to the data and figures given in the question.