On June 15. 2021, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $360 million. The expected completion date is April 1, 2023. just in time for the 2023 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions): 2021 Costs incurred during the year Estimated costs to complete as of December 31 $ 30 170 2022 2023 $140 8e $40 Required: 1. Compute the revenue and gross profit will Sanderson report in its 2021, 2022, and 2023 income statements related to this contract assuming Sanderson recognizes revenue over time according to percentage of completion. 2 Compute the revenue and gross profit will Sanderson report in its 2021, 2022, and 2023 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 2022 are $170 million instead of $80 million. Compute the amount of revenue and gross profit or loss to be recognized in 2022 assuming Sanderson recognizes revenue over time according to

On June 15. 2021, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $360 million. The expected completion date is April 1, 2023. just in time for the 2023 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions): 2021 Costs incurred during the year Estimated costs to complete as of December 31 $ 30 170 2022 2023 $140 8e $40 Required: 1. Compute the revenue and gross profit will Sanderson report in its 2021, 2022, and 2023 income statements related to this contract assuming Sanderson recognizes revenue over time according to percentage of completion. 2 Compute the revenue and gross profit will Sanderson report in its 2021, 2022, and 2023 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 2022 are $170 million instead of $80 million. Compute the amount of revenue and gross profit or loss to be recognized in 2022 assuming Sanderson recognizes revenue over time according to

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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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

On June 15, 2021, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington.
D.C., for $360 million. The expected completion date is April 1, 2023. just in time for the 2023 baseball season. Costs incurred and
estimated costs to complete at year-end for the life of the contract are as follows ($ in millions):
2021
$ 30
170
2022 2023
Costs incurred during the year
Estimated costs to complete as of December 31
$140
$40
80
Requlred:
1. Compute the revenue and gross profit will Sanderson report in its 2021, 2022, and 2023 income statements related to this contract
assuming Sanderson recognizes revenue over time according to percentage of completion.
2. Compute the revenue and gross profit will Sanderson report in its 2021, 2022, and 2023 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 2022 are $170 million instead of $80 million. Compute the amount of
revenue and gross profit or loss to be recognized in 2022 assuming Sanderson recognizes revenue over time according to
percentage of completion.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
Compute the revenue and gross profit will Sanderson report in its 2021, 2022, and 2023 income statements related to this contract
assuming Sanderson recognizes revenue over time according to percentage of completion. (Enter your answers in millions. Loss amounts
should be indicated with a minus sign. Use percentages as calculated and rounded in the table below to arrive at your final answer.)
Percentages of completion
Choose numerator
Choose denominator
% complete to date
Actual costs to date
Actual costs to date
2021
2022
2023
2021
To date
Recognized in prior years
Recognized in 2021
Construction revenue
Construction expense
Gross profit (loss)
2022
To date
Recognized in prior years
Recognized in 2022
Construction revenue
Construction expense
Gross profit (loss)
2023
Recognized in prior years
Recognized in 2023
To date
Construction revenue
Construction expense
Gross profit (loss)

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