On February 1, 2017, Tanks A Lot obtained a contract to build a...
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Accounting
On February 1, 2017, Tanks A Lot obtained a contract to build a large municipal aquarium. The aquarium was to be built at a total cost of $5,400,000 and was scheduled for completion by September 1, 2019. One clause of the contract stated that Tanks A Lot was to deduct $15,000 from the $6,600,000 billing price for each week that completion was delayed. Completion was delayed 6 weeks, which resulting in a $90,000 penalty. Tanks A Lot uses the percentage of completion method to account for revenue. Below are the data pertaining to the construction period:
2017
2018
2019
Costs Incurred during year
1744000
1896000
2010000
Estimated costs to complete
3706000
1960000
0
Progress billings to date
1200000
3100000
6540000
Cash collected to date
1000000
2800000
6540000
Calculate the total revenue recognized, total expenses recognized, and total gross profit recognized in each year.
Hints: For revenue: calculate the percentage complete the project is each year based on the costs incurred to date in comparison to total estimated costs for the project and apply it to total revenue for the project. For gross profit: subtract the current year costs from the current year revenue. For years 2018 and 2019: consider what was recorded before
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