Exercise 1837 Your answer is partially correct Try again Yan

Exercise 18-37 Your answer is partially correct. Try again. Yanmei Construction Company began operations on January 1, 2017. During the year, Yanmei Construction entered into a contract with Lundquist Corp. to construct a manufacturing facility. At that time, Yanmei estimated that it would take 5 years to complete the facility at a total cost of $4,500,000. The total contract price for construction of the facility is $6,000,000. During the year, Yanmei incurred $1,185,800 in construction costs related to the construction project. The estimated cost to complete the contract is $4,204,200. Lundquist Corp. was billed and paid 25% of the contract price. Prepare schedules to compute the amount of gross profit to be recognized for the year ended December 31, 2017, and the amount to be shown as \"costs and recognized profit in excess of billings\" or \"billings in excess of costs and recognized profit\" at December 31, 2017, under each of the following methods. (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45). If answer is o, please enter 0. Do not leave any fields blank.) (a) Completed-contract method. Gross Profit to be recognized Computation of Billings on Uncompleted Contract in Excess of Related Costs under Completed-Contract Method Construction Costs Incurred During the Year 1185800 Partial Billings on Contract 1500000 (314200) (b) Percentage-of-completion method

Solution

Completed Contract Method

Gross Profit to be recognized

Profit should not be recognized before completion of project

Construction Costs Incurred during the Year

1,185,800

Partial Billings on contract: 6,000,000 * 25%

-1,500,000

Billings on uncompleted contract in excess of related cost

-314,200

Percentage-of Completion Method

Contract Price

6,000,000

Estimated total cost : (1,185,800 + 4,204,200)

-5,390,000

Estimated Total Gross Profit from Contract

$ 610,000

Percentage of Completion

(1,185,800 /5,390,000)

22%

Gross Profit to be recognized during the year: 610,000 * 22%

$ 134,200

Gross Profit to be recognized	Profit should not be recognized before completion of project
Construction Costs Incurred during the Year	1,185,800
Partial Billings on contract: 6,000,000 * 25%	-1,500,000
Billings on uncompleted contract in excess of related cost	-314,200