Project 50 gross profit current year costsexp

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project 50 Gross profit, current year Costs/Exp. Recognized, current year 155 150 0 150 Completed contract method 0 0 0 160 0 -10 -10 0 -5 5 145 Yr1 GP + Yr2 GP + Yr3 GP = GP from the project Yr3 GP = -5 – Yr1 GP – Yr2 GP = (-5) – 0 – (-10) = 5 profit Yr3 partial income statement: Construction revenue 150 Less: Construction expense 145 GP from l-t contract 5 Yr3 partial balance sheet: Current asset: A/R 10
Revenue Recognition - Construction Contracts: Revenue and earnings on construction contracts are recognized under the percentage of completion method using the ratio of costs incurred to estimated total costs . Provisions are recognized in the consolidated statements of operations for the full amount of estimated losses on uncompleted contracts whenever evidence indicates that the estimated total cost of a contract exceeds its estimated total revenue. Excerpted from Granite Construction’s footnotes: Now, you should proudly say that you understand Granite Construction’s accounting, AND that you can prepare financial statements for them.

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