Sandhill Construction, which follows ASPE entered into a contract to construct a bridge for a contract price of $2.8 million. Construction began in 2022 and was completed in 2024. Below are the details of the transactions related to the contract: Costs incurred during the year Estimated costs to complete Revenue Expenses Gross Profit $ Calculate the gross profit to be recognized each year using the completed-contract method. $ 2022 2022 $637,000 1,489,000 2023 $844,000 $715,900 713,000 $ 2024 2023 $ 2024 SUPPORT

Sandhill Construction, which follows ASPE entered into a contract to construct a bridge for a contract price of $2.8 million. Construction began in 2022 and was completed in 2024. Below are the details of the transactions related to the contract: Costs incurred during the year Estimated costs to complete Revenue Expenses Gross Profit $ Calculate the gross profit to be recognized each year using the completed-contract method. $ 2022 2022 $637,000 1,489,000 2023 $844,000 $715,900 713,000 $ 2024 2023 $ 2024 SUPPORT

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter3: Income Sources

Section: Chapter Questions

Problem 88P

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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

Sandhill Construction, which follows ASPE entered into a contract to construct a bridge for a contract price of $2.8 million.
Construction began in 2022 and was completed in 2024. Below are the details of the transactions related to the contract:
Costs incurred during the year
Estimated costs to complete
Revenue
Expenses
$
Gross Profit $
2022
2022
$637,000
1,489,000
$844,000
Calculate the gross profit to be recognized each year using the completed-contract method.
2023
$
$
713,000
2024
$715,900
2023
0
$
$
2024
SUPPORT

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