Question

Crane Construction Company had a contract starting April 2021, to construct a $22800000 building that is expected to be completed in September 2023, at an estimated cost of $20800000. At the end of 2021, the costs to date were $7072000 and the estimated total costs to complete had not changed. The progress billings during 2021 were $3600000 and the cash collected during 2021 was 3080000. Crane uses the percentage-of-completion method. For the year ended December 31, 2021, Crane would recognize gross profit on the building of:____.a. $680000. b. $0. c. $13728000. d. $620351.

Answer 1

Answer: a. $680,000

Step-by-step explanation:

Gross profit to be recognized from entire project;

= Value of building - cost

= 22,800,000 - 20,800,000

= $2,000,000

In 2021, a cost of $7,072,000 was incurred out of the total cost of $20,800,000.

Percentage complete is therefore;

= 7,072,000/20,800,000

= 34%

The gross profit recognized is therefore;

= 34% * Total gross profit

= 34% * 2,000,000

= $680,000