Hollywood Construction Company recognizes revenue over time according to percentage of completion for its long-term construction contracts. During 2018, Hollywood began work on a $3,000,000 fixed-fee construction contract, which was completed in 2021. The accounting records disclosed the following data at year-end:

Cumulative contract costs incurred Estimated costs to complete at end of year
2018 $200,000 $1800,000
2019 $1100,000 1100,000
2020 2,000,000 4,00,000

For the 2020 year, Hollywood should have recognized gross profit on this contract of :___________

Respuesta :

Answer:

Recognized gross profit on this contract for the 2020 year = $100,000

Explanation:

Note: See the attached excel file for the Calculation of Recognized Gross Profit on this contract for the 2020 year (in bold red color).

In the attached excel file, Recognized Gross Profit for Each Year is calculated using the following formula:

Recognized Gross Profit = Revenue for Current Period - Actual Cost Incurred

From the attached excel file, we have:

Recognized gross profit on this contract for the 2020 year = $100,000

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