Question

Cooper Construction Company had a contract starting April 2021, to construct a $24,000,000 building that is expected to be completed in September 2023, at an estimated cost of $22,000,000. At the end of 2021, the costs to date were $10,120,000 and the estimated total costs to complete had not changed. The progress billings during 2021 were $4,800,000 and the cash collected during 2021 was 3,200,000. Cooper uses the percentage-of-completion method.

For the year ended December 31, 2021, Cooper would recognize gross profit on the building of:

Answer 1

Cooper would recognize gross profit on the building of $920,000.

Step-by-step explanation:

% of completed

= cost incurred / estimated cost

= $10,120,000/$22,000,000

= 46%

Revenue to be recognized

= $24,000,000*46%

= $11,040,000

Gross profit

= $11,040,000 - $10,120,000

= $920,000

Therefore, Cooper would recognize gross profit on the building of $920,000.