Summary Business Accounting

Question:

Brady Construction Company contracted to build an apartment complex for a price of $5,000,000.

Construction began in 2013 and was completed in 2015. The following are a series of independent

situations, numbered

through 6, involving differing costs for the project. All costs are stated in thousands of dollars.




Required:

Copy and complete the following table.




Answer:



SUMMARY



Percentage-of-Completion Completed Contract

Situation 2013 2014 2015 2013 2014 2015

1 $166,667 $233,333 $100,000 $0 $0 $500,000

, 2 $166,667 $(66,667) $100,000 $0 $0 $200,000

3 $166,667 $(266,667) $(100,000) $0 $(100,000) $(100,000)

4 $125,000 $375,000 $0 $0 $0 $500,000

5 $125,000 $(125,000) $200,000 $0 $0 $200,000

6 $(100,000) $(100,000) $(100,000) $(100,000) $(100,000) $(100,000)



Situation 1 - Percentage-of-Completion



2013 2014 2015

Contract price $5,000,000 $5,000,000 $5,000,000

Actual costs to date 1,500,000 3,600,000 4,500,000

Estimated costs to complete 3,000,000 900,000 -0-

Total estimated costs 4,500,000 4,500,000 4,500,000

Estimated gross profit

(actual in 2015) $ 500,000 $ 500,000 $ 500,000



Gross profit (loss) recognized:



2013: $1,500,000

= 33.3333% x $500,000 = $166,667

$4,500,000



2014: $3,600,000

= 80.0% x $500,000 = $400,000 – 166,667 = $233,333

$4,500,000