Summary data for Benedict Construction Co.'s (BCC) Job 1227, which was completed in 2021, are presented below: Bid price $ 450,000 Contract cost: 2020 (180,000) 2021 (195,000) Gross profit: 75,000 Estimated cost to complete: 12/31/2020 $ 200,000 12/31/2021 0 Assuming BCC recognizes revenue over time according to percentage of completion for this contract, the gross profit recognized in 2020 would be (rounded to the nearest thousand) :

Question

Shaylee Ingram

Business

14 September, 16:04

Summary data for Benedict Construction Co.'s (BCC) Job 1227, which was completed in 2021, are presented below: Bid price $ 450,000 Contract cost: 2020 (180,000) 2021 (195,000) Gross profit: 75,000 Estimated cost to complete: 12/31/2020 $ 200,000 12/31/2021 0 Assuming BCC recognizes revenue over time according to percentage of completion for this contract, the gross profit recognized in 2020 would be (rounded to the nearest thousand) :

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Hannah Trujillo · Answer 1

The gross profit recognized in 2020 would be $33,156

Explanation:

In order to calculate the Computation of Gross profit to be recognised in year 2020 we would need to calculate first the Percentage of completion as follows:

Percentage of completion = Cost incurred in 2020 / Total cost

Total cost = Cost incurred + estimated cost

= $180,000 + $200,000 = $380,000

Percentage of completion = $180,000 / $380,000 = 47.368%

Revenue to be recognised in year 2020 = contract revenue * percentage of completion

= $450,000*47.368% = $213,156

Therefore, Gross profit = Revenue - Cost

Gross profit = $213,156 - $180,000 = $33,156

The gross profit recognized in 2020 would be $33,156