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Construction costs: 2020: $100,000 2021: $186,000 2022: $464,000 Estimated Costs to Complete: 2020: $400,000 2021: $464,00O 2022: $0 Total Contract Price: $700,000 Assuming this company uses the percentage of completion method, how much Gross Profit/Loss will the company recognize in 2021? O $464,000 O $(90,000) O $$22,000) O $50,000

Construction costs: 2020: $100,000 2021: $186,000 2022: $464,000 Estimated Costs to Complete: 2020: $400,000 2021: $464,00O 2022: $0 Total Contract Price: $700,000 Assuming this company uses the percentage of completion method, how much Gross Profit/Loss will the company recognize in 2021? O $464,000 O $(90,000) O $$22,000) O $50,000

FINANCIAL ACCOUNTING
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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Construction costs: 2020: $100,000 2021: $186,000 2022: $464,000 Estimated Costs to Complete: 2020: $400,000 2021: $464,000 2022: $0 Total Contract Price: $700,00O Assuming this company uses the percentage of completion method, how much Gross Profit/Loss will the company recognize in 2021? O $464,000 O $(90,000) O $(22,000) O $50,000
Transcribed Image Text:Construction costs: 2020: $100,000 2021: $186,000 2022: $464,000 Estimated Costs to Complete: 2020: $400,000 2021: $464,000 2022: $0 Total Contract Price: $700,00O Assuming this company uses the percentage of completion method, how much Gross Profit/Loss will the company recognize in 2021? O $464,000 O $(90,000) O $(22,000) O $50,000
Expert Solution
Step 1 Calculation of profit incurred in the year 2020
2020
Cost to Date (12/31/2020) $ 100,000
Estimated Cost to Complete $ 400,000
Estimated Total Cost $ 500,000
   
Percent Complete ( $ 100,000 / $ 500000) 20 %
   
Revenue Recognized ($700000 x 20 %) $ 140000
Less: Cost incurred ($ 100,000)
Gross Profit/ (loss) Recognized in 2020 $ 40000  
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