Question

Cape Cod Ship Building Company contracted a construct ship for $2,000,000. The project began in 2019 and was completed in 2020. Cape Cod Ship Building Co. recognizes revenue upon contract completion. Data relating to the contract as summarized below:

2019 2020
Costs incurred during the year 300k 1,575,000
Estimated Costs to comp as of 12/31 1.2M 0
Billings during the year 380k 1,620,000
Cash collections during the yeae 250k 1,750,000
Total est. and actual construction costs ?1? ?2?
Total estimated gross profit ?3? ?4?
Gross profit recognized for the year ?5? ?6?

Journal Entries for 2019 and 220

Answer 1

The subject of this question is Business and it involves contract revenue recognition. We calculate the total estimated and actual construction costs, the total estimated gross profit, and the gross profit recognized for the year in this scenario.

Step-by-step explanation:

The subject of this question is Business, specifically related to contract revenue recognition.

To calculate the total estimated and actual construction costs, we need to add up the costs incurred during each year. For 2019, the costs incurred were $300,000, and for 2020, the costs incurred were $1,575,000. So, the total estimated and actual construction costs would be $300,000 + $1,575,000 = $1,875,000.

To calculate the total estimated gross profit, we need to subtract the estimated costs to complete as of 12/31 of the previous year from the total contract price. In this case, the contract price is $2,000,000 and the estimated costs to complete as of 12/31 2019 are $1,200,000. So, the total estimated gross profit would be $2,000,000 - $1,200,000 = $800,000.

The gross profit recognized for the year is the difference between the total estimated and actual construction costs and the total estimated gross profit. In this case, the total estimated and actual construction costs are $1,875,000 and the total estimated gross profit is $800,000. So, the gross profit recognized for the year would be $1,875,000 - $800,000 = $1,075,000.