1. Compute the revenue and gross profit that Sanderson will report in its 2024, 2025, and 2026 income statements related to this contract, assuming Sanderson recognizes revenue over time according to percentage of completion. 2. Compute the revenue and gross profit that Sanderson will report in its 2024, 2025, and 2026 income statements related to this contract, assuming this project does not qualify for revenue recognition over time. 3. Suppose the estimated costs to complete at the end of 2025 are $120 million instead of $30 million. Compute the amount of revenue and gross profit or loss to be recognized in 2025, assuming Sanderson recognizes revenue over time according to percentage of completion.

1. Compute the revenue and gross profit that Sanderson will report in its 2024, 2025, and 2026 income statements related to this contract, assuming Sanderson recognizes revenue over time according to percentage of completion. 2. Compute the revenue and gross profit that Sanderson will report in its 2024, 2025, and 2026 income statements related to this contract, assuming this project does not qualify for revenue recognition over time. 3. Suppose the estimated costs to complete at the end of 2025 are $120 million instead of $30 million. Compute the amount of revenue and gross profit or loss to be recognized in 2025, assuming Sanderson recognizes revenue over time according to percentage of completion.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.

Question

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On June 15, 2024, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington,
D.C., for $310 million. The expected completion date is April 1, 2026, just in time for the 2026 baseball season. Costs incurred and
estimated costs to complete at year-end for the life of the contract are as follows ($ in millions):
Costs incurred during the year
Estimated costs to complete as of December
31
Required:
Required 1 Required 2
Year
2024
2025
2026
1. Compute the revenue and gross profit that Sanderson will report in its 2024, 2025, and 2026 income statements related to this
contract, assuming Sanderson recognizes revenue over time according to percentage of completion.
2. Compute the revenue and gross profit that Sanderson will report in its 2024, 2025, and 2026 income statements related to this
contract, assuming this project does not qualify for revenue recognition over time.
3. Suppose the estimated costs to complete at the end of 2025 are $120 million instead of $30 million. Compute the amount of
revenue and gross profit or loss to be recognized in 2025, assuming Sanderson recognizes revenue over
percentage of completion.
according to
$
$
Complete this question by entering your answers in the tabs below.
S
Required 3
venue
recognized
Compute the revenue and gross profit that Sanderson will report in its 2024, 2025, and 2026 income statements related to
this contract, assuming this project does not qualify for revenue recognition over time.
Note: Enter your answer in millions (1.e., $4,000,000 should be entered as $4). Loss amounts should be indicated with a
minus sign. Leave no cells blank.
0 million $
0 million
$
116 million
2024
Gross Profit (Loss)
recognized
$ 70
130
0 million
0 million
million
2025
< Required 1
$ 60
30
2026
$30
Required 3 >
Show less A

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