(TCO A) Tim Construction Co. began operations in 2016. Construction activity for

Question

(TCO A) Tim Construction Co. began operations in 2016. Construction activity for 2016 is shown below. Tim uses the percentage of completion method.

What amount of Gross Profit should Tim show on the Income Statement of 2016 related to Contract 3?

Contract Contract
Price Billings
Through
12/31/16 Collections
Through
12/31/16 Costs
to
12/31/16 Estimated
Costs to
Complete 1 $5,200,000 $3,500,000 $2,600,000 $3,000,000 $1,000,000 2 $3,600,000 $1,500,000 $1,000,000 $820,000 $1,880,000 3 $3,300,000 $1,900,000 $1,800,000 $2,250,000 $1,200,000

Explanation / Answer

Hence Loss of -$150000 to be showed in income statement of 2016 related with contract-3

Computation of % Completion & Gross Profit 2016 Contract price $3,300,000 Estimated cost: Cost To date $2,250,000 Estimated costs To Complete $1,200,000 Estimated Total costs $3,450,000 Estimated Total gross profit(3300000-3450000) -$150,000 Total Gross profit To be Recognized -$150,000 Gross profit Recognized in Previous years $0 Gross profit Recognized during the current year -$150,000

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