Question

Martinez Construction Company has entered into a contract beginning January 1, 2020, to build a parking complex. It has been estimated that the complex will cost $594,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $901,000. The following data pertain to the construction period:
2017 2018 2019
Costs to date $255,420 $433,620 $604,000
Estimated costs to 338,580 160,380 0
Progress billings to ate 271,000 547,000 901,000
Cash collected to date 241,000 497,000 901,000

Required:
a. Using the method, compute the estimated gross profit that would be recognized during each year of construction period.
b. Using the completed - contract method, compute the estimated gross profit that be recognized during each year of the period.

Answer 1

Answer:

Estimated gross profit 767,840 627,760 297,000

Explanation:

Compi for the estimated gross profit that would be recognized during each year of construction period.

2017 2018 2019

Price $901,000 $901,000 $901,000

Costs to date $255,420 $433,620 $604,000

Estimated costs to 338,580 160,380 0

Estimated Total cost 133,160 273,240 604,000

Estimated gross profit 767,840 627,760 297,000

Therefore the estimated gross profit that would be recognized during each year of construction period will be :

2017 2018 2019

767,840 627,760 297,000