applier Corp. enters into a government contract during the year to provide computer equipment for $2.000,000. The contract consists of a single performance obligation to ovide specified equipment in three years. Total costs estimated by Supplier Corp. for the contract are $1,400,000. The equipment is highly specialized and has no ternative uses. As negotiated in the contract, any costs incurred by Supplier Corp. plus a specified profit margin will be paid to Supplier Corp, in the event of a contract ancellation. Actual costs incurred during the first year of the contract were $640,000 including unexpected cost overruns of $80,000 due to labor inefficiencies. ssume that at the end of the second year of the contract, the estimate of total costs has increased to $1,500,000 million due to an increase in cost of materials. Actual costs curred to date are $1,125,000, excluding year one inefficiencies. Calculate (1) recognized revenue. (2) the gross profit, and (3) adjusted contract margin to be recorded in the second year of the contract. 1 Recognized revenue 2 Gross profit 3 Adjusted contract margins b. Calculate (1) cumulative recognized revenue, (2) cumulative gross profit, and (3) cumulative adjusted contract margin at the end of the second year of the contract. 1 Cumulative recognized revenice S 2 Cumulative gross profic 1 3 Cumulative adjusted contract margins
applier Corp. enters into a government contract during the year to provide computer equipment for $2.000,000. The contract consists of a single performance obligation to ovide specified equipment in three years. Total costs estimated by Supplier Corp. for the contract are $1,400,000. The equipment is highly specialized and has no ternative uses. As negotiated in the contract, any costs incurred by Supplier Corp. plus a specified profit margin will be paid to Supplier Corp, in the event of a contract ancellation. Actual costs incurred during the first year of the contract were $640,000 including unexpected cost overruns of $80,000 due to labor inefficiencies. ssume that at the end of the second year of the contract, the estimate of total costs has increased to $1,500,000 million due to an increase in cost of materials. Actual costs curred to date are $1,125,000, excluding year one inefficiencies. Calculate (1) recognized revenue. (2) the gross profit, and (3) adjusted contract margin to be recorded in the second year of the contract. 1 Recognized revenue 2 Gross profit 3 Adjusted contract margins b. Calculate (1) cumulative recognized revenue, (2) cumulative gross profit, and (3) cumulative adjusted contract margin at the end of the second year of the contract. 1 Cumulative recognized revenice S 2 Cumulative gross profic 1 3 Cumulative adjusted contract margins
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Supplier Corp, enters into a government contract during the year to provide computer equipment for $2,000,000. The contract consists of a single performance obligation to
provide specified equipment in three years. Total costs estimated by Supplier Corp. for the contract are $1,400,000. The equipment is highly specialized and has no
alternative uses. As negotiated in the contract, any costs incurred by Supplier Corp. plus a specified profit margin will be paid to Supplier Corp. in the event of a contract
cancellation. Actual costs incurred during the first year of the contract were $640,000 including unexpected cost overruns of $80,000 due to labor inefficiencies.
Assume that at the end of the second year of the contract, the estimate of total costs has increased to $1,500,000 million due to an increase in cost of materials. Actual costs
incurred to date are $1,125,000, excluding year one inefficiencies.
a. Calculate (1) recognized revenue, (2) the gross profit, and (3) adjusted contract margin to be recorded in the second year of the contract.
1 Recognized revenue
2 Gross profit
3 Adjusted contract margin s
b. Calculate (1) cumulative recognized revenue, (2) cumulative gross profit, and (3) cumulative adjusted contract margin at the end of the second year of the contract.
1 Cumulative recognized revenue
2 Cumulative gross prof
3 Cumulative adjusted contract margin S
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