Question

2. Bacha construction company contracted to build a municipal warehouse for the city of Adama for BR 5,200,000. The construction began on February 2,2008 and completed in 2010.the company uses percentage of accounting records of the company in relation to this contract : 2008 2009 2010 Total estimated cost of the contract br 4,000,000 Cumulative gross profit recognized 330,000 700,000 Instruction br4,160,000 ? br4,200,000 (a) Compute the construction costs incurred in each of the year 2008,2009 , & 2010. (b) Compute the contract revenue and gross profit recognized in each of the year 2008,2009,& 2010​

Answer 1

Using the percentage of completion method and the given data, costs incurred and gross profit for each year of construction by Bacha construction company can be computed. The costs and profits depend on the contract revenue, estimated costs, and cumulative gross profit previously recognized.

Step-by-step explanation:

A student asked about calculating construction costs for each year and gross profit recognized for each year by the Bacha construction company for a warehouse project. We compute the costs and profit based on the percentage of completion method using the accounting records provided.

• The total estimated cost of the contract is BR 4,000,000.
• The contract revenue agreed upon is BR 5,200,000.
• Cumulative gross profit recognized in the years 2008 and 2009 is BR 330,000 and BR 700,000 respectively.
• Instruction BR indicates adjustments of the costs to BR 4,160,000 and BR 4,200,000.

Calculating Construction Costs and Gross Profit

To calculate construction costs incurred in each year and contract revenue and gross profit recognized, we need to apply the percentage of completion method. This involves calculating the percentage of work completed each year, which is based on costs incurred compared to the total estimated costs.

Assuming the completion percentages equal the ratio of the cumulative profit recognized to the cumulative gross profit calculated (contract revenue minus estimated costs), we can calculate the costs incurred and revenue recognized for each year with the available data.

Answer 2

Explanation:2. Bacha construction company contracted to build a municipal warehouse for the city of Adama for BR 5,200,000. The construction began on February 2,2008 and completed in 2010.the company uses percentage of accounting records of the company in relation to this contract :

2008 2009 2010

Total estimated cost of the contract br 4,000,000 br4,160,000 br4,200,000

Cumulative gross profit recognized 330,000 700,000 ?

Instruction

(a) Compute the construction costs incurred in each of the year 2008,2009 ,& 2010.

(b) Compute the contract revenue and gross profit recognized in each of the year 2008,2009,& 2010