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Intermediate Accounting: Reporting...
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Intermediate Accounting: Reporting...
Newberg Construction Corp. contracted to construct a building for $400,000. Construction began in 2019 and was completed in 2020. Data relating to the contract arc as follows:
Newberg determined that its performance obligation was satisfied over time.
Required:
For the years ended December 31, 2019 and 2020, respectively, how much gross profit should Newberg report?
State the amount of gross profit reported, for the years ended December 31, 2019 and December 31, 2020.
Contract: Contract is an agreement among two parties or more parties which includes enforceable obligations and rights. A contract can be “written oral or implied” by ordinary business practices.
Compute the amount of gross profit during the years 2019 and 2020:
| Particulars | 2019 | 2020 |
| Construction costs incurred to date | $200,000 | $310,000 |
| Estimated costs to complete | $100,000 | |
| Total estimated costs | $300,000 | $310,000 |
| Percent complete | 66.667% | 100% |
| Estimated profit on contract | $100,000 | (1)$90,000 |
| Gross profit to be recognized | $66,667 | (2)$23,333 |
Table (1)
Therefore, the amount of gross profit recognized during 2019 is $66,667 and during 2020 is $23,333.
Note: $310,000
Working notes:
(1)Calculate the amount of estimated profit on contract for the year 2020:
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