Answer:
% of completion= 33.7% for 2021
% of completion = 55.4% for 2022
% of completion = 100% for 2023
Gross profit/loss = $696,770 for 2021
Gross profit/loss = -$141,660 for 2022
Gross profit/loss = -$400,000 for 2023
Explanation:
See the table below
Year Actual cost Total incurred cost Total estimated cost
2021 $2,070,000 $2,070,000 $6,140,000
2022 $2,620,000 $4,690,000 $8,470,000
2023 $3,920,000 $8,610,000 $8,610,000
Percentage of completion is calculated using the formula;
% of completion = Total incurred cost /Total estimated cost *100
For 2021:
% of completion = $2,070,000 /$6,140,000 *100
=0.337 *100
=33.7%
For 2022:
% of completion = $4,690,000 /$8,470,000 *100
=0.554 *100
= 55.4%
For 2023:
% of completion = $8,610,000 / $8,610,000 *100
=1 * 100
= 100%
Revenue and Gross profit or loss recognized in 2021, 2022 and 2023
For 2021: Previous year Recognized in 2021
Price $8,210,000
%completion 33.7%
Revenue $2,766,770 0 $2,766,770
Expenses $2,070,000 0 $2,070,000
Gross profit/loss $696,770 $696,770
For 2022: Previous year Recognized in 2022
Price $8,210,000
%completion 55.4%
Revenue $4,548,340 $2,766,770 $1,781,570
Expenses $4,690,000 $2,070,000 $2,620,000
Gross profit/loss -$141,660 -$838,430
For 2023: Previous year Recognized in 2023
Price $8,210,000
%completion 100%
Revenue $8,210,000 $4,548,340 $3661660
Expenses $8,610,000 $4,690,000 $3920000
Gross profit/loss = -$400,000 -$258340
2. Journal Entries for 2021:
Year General Journal Debit Credit
2021 Construction in progress $2,070,000
Various accounts $ 2,070,000
(Construction cost incurred)
Accounts receivable $2,570,000
Billings on construction $2,570,000
Cash $2,320,000
Accounts receivable $2,320,000
Construction in progress $696,770
Cost of construction $2,070,000
Revenue from long-term contracts $2,766,770
