On June 15, 2024, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $230 million. The expected completion date is April 1, 2026, just in time for the 2026 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions): Costs incurred during the year Estimated costs to complete as of December 31 Required: 2024 $ 25 100 2025 $75 60 2026 $ 35 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 $100 million instead of $60 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.

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Chapter1: Financial Statements And Business Decisions
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Exercise 6-20 (Algo) Long-term contract; revenue recognition over time vs. upon project
completion [LO6-9]
On June 15, 2024, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in
Washington, D.C., for $230 million. The expected completion date is April 1, 2026, just in time for the 2026 baseball
season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions):
Costs incurred during the year
Estimated costs to complete as of December
31
Required:
Required 1 Required 2 Required 3
Year
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 $100 million instead of $60 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.
2024
2025
2026
Complete this question by entering your answers in the tabs below.
Revenue
recognized
million
million
million
2024
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 (i.e., $4,000,000 should be entered as $4). Loss amounts should be indicated with a
minus sign. Leave no cells blank.
Gross Profit (Loss)
recognized
$ 25
100
million
million
million
2025
< Required 1
$ 75
60
2026
$ 35
Required 3 >
Show less A
Transcribed Image Text:Exercise 6-20 (Algo) Long-term contract; revenue recognition over time vs. upon project completion [LO6-9] On June 15, 2024, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $230 million. The expected completion date is April 1, 2026, just in time for the 2026 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions): Costs incurred during the year Estimated costs to complete as of December 31 Required: Required 1 Required 2 Required 3 Year 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 $100 million instead of $60 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. 2024 2025 2026 Complete this question by entering your answers in the tabs below. Revenue recognized million million million 2024 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 (i.e., $4,000,000 should be entered as $4). Loss amounts should be indicated with a minus sign. Leave no cells blank. Gross Profit (Loss) recognized $ 25 100 million million million 2025 < Required 1 $ 75 60 2026 $ 35 Required 3 > Show less A
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