Supplier Corp. enters into a government contract during the year to provide computer equipment for $4,400,000. The contract consists of a single performance obligation to provide specified equipment in three years. Total costs estimated by Supplier Corp. for the contract are $3,080,000 . The equipment is highly specialized and has no alternative uses. As negotiated in the contract, any costs incurred by Supplier Corp. plus a specified profit margin will be paid to Supplier Corp. in the event of a contract cancellation. Actual costs incurred during the year were $1,408,000 including unexpected cost overruns of $176,000 due to labor inefficiencies. a. Would revenue be recognized over time or at a point in time for this contract? Answer b. Calculate (1) recognized revenue, (2) the gross profit, and (3) adjusted contract margin to be recorded during the year. 1. Recognized revenue Answer 2. Gross profit Answer 3. Adjusted contract margin Answer
Computing Revenue and Gross Profit on Long-Term Construction Contract
Supplier Corp. enters into a government contract during the year to provide computer equipment for $4,400,000. The contract consists of a single performance obligation to provide specified equipment in three years. Total costs estimated by Supplier Corp. for the contract are $3,080,000 . The equipment is highly specialized and has no alternative uses. As negotiated in the contract, any costs incurred by Supplier Corp. plus a specified profit margin will be paid to Supplier Corp. in the event of a contract cancellation. Actual costs incurred during the year were $1,408,000 including unexpected cost overruns of $176,000 due to labor inefficiencies.
a. Would revenue be recognized over time or at a point in time for this contract?
Answer
b. Calculate (1) recognized revenue, (2) the gross profit, and (3) adjusted contract margin to be recorded during the year.
| 1. Recognized revenue | Answer
|
| 2. Gross profit | Answer
|
| 3. Adjusted contract margin | Answer
|
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