Summary data for Benedict Construction Co.'s (BCC) Job 1227, which was completed in 2021, are presented below: Bid price $450,000
Contract cost:2020 (180,000)
2021 (195,000)
Gross profit: 75,000
Estimated cost to complete:
12/31/2020$200,000
12/31/2021 0
Assuming BCC recognizes revenue over time according to percentage of completion for this contract, the gross profit recognized in 2020 would be (rounded to the nearest thousand):
A.) 33,000
B.) 36,000
C.) 69,000
D.) 30,000

A.) 33,000

Explanation:

The computation of the gross profit is as follows;

But before that following calculations need to be done

Percentage of completion = Cost incurred in 2020 ÷ Total cost

where,

Total cost = Cost incurred + estimated cost

= $180,000 + $200,000

= $380,000

Now

Percentage of completion is

= $180,000 ÷ $380,000

= 47.368%

Now  

Revenue to be recognized in year 2020 is

= contract revenue × percentage of completion

= $450,000 × 47.368%

= $213,156

So,

Gross profit = Revenue - Cost

= $213,156 - $180,000

= $33,156

= $33,000

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