In 2018, the Laguna Inc entered into a contract to construct a road for 5th Avenue for $14,000,000. The road was completed in 2018. Information related to the contract is as follows: 1. Calculate the amount of gross profit to be recognized in each of the three years under percentage-of-completion method of accounting for long-term construction contracts.2. Calculate the amount of gross profit to be recognized in each of the three years under completed contract method of accounting for long-term construction contracts. 201620172018Cost incurred during the year$3,360,000$5,040,000$3,080,000Estimated costs to complete as of year-end7,840,0002,800,000-0-Billings during the year2,800,0005,600,0005,600,000Cash collections during theyear2,520,0005,040,0006,440,000 Calculate the amount of gross profit to be recognized in each of the three years assuming thefollowing costs incurred and costs to complete information:201620172018Costs incurred during the year$3,360,000$5,320,000$5,460,000Estimated costs to complete as of year-end7,840,0005,740,000-0-

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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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In 2018, the Laguna Inc entered into a contract to construct a road for 5^th Avenue for $14,000,000. The road was completed in 2018. Information related to the contract is as follows:

1. Calculate the amount of gross profit to be recognized in each of the three years under percentage-of-completion method of accounting for long-term construction contracts.

2. Calculate the amount of gross profit to be recognized in each of the three years under completed contract method of accounting for long-term construction contracts.

2016
2017
2018
Cost incurred during the year
$3,360,000
$5,040,000
$3,080,000
Estimated costs to complete as of year-end
7,840,000
2,800,000
-0-
Billings during the year
2,800,000
5,600,000
5,600,000
Cash collections during the
year
2,520,000
5,040,000
6,440,000

Calculate the amount of gross profit to be recognized in each of the three years assuming the
following costs incurred and costs to complete information:
2016
2017
2018
Costs incurred during the year
$3,360,000
$5,320,000
$5,460,000
Estimated costs to complete as of year-end
7,840,000
5,740,000
-0-

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