Pharoah Construction Company had a contract starting April 2021, to construct a $23200000 building that is expected to be completed in September 2023, at an estimated cost of $21200000. At the end of 2021, the costs to date were $8056000 and the estimated total costs to complete had not changed. The progress billings during 2021 were $4000000 and the cash collected during 2021 was 3120000. Pharoah uses the percentage-of-completion method.
For the year ended December 31, 2021,Pharoah would recognize gross profit on the building of:
O $694483.
O $13144000.
O $760000.
O $0.

Calculation of Recognized Gross Profit for the Year 2021:

(Cost incurred in 2021 / estimated cost to finish) times 100 equals the percentage of completion in 2021.

Cost for 2021 is $8056000.

$21200000 is the estimated total cost.

Completed percentage in 2021 equals ($8056000/$21200000) x 100, or 38%.

Revenue Acknowledged in Year 2021 = Contract Revenue x Completion Rate

Revenue = $23200000 x 38%

Revenue = $8816000

Gross Profit is calculated as Revenue for the year 2021 less Cost for the year 2021.

Gross Profit = $8816000 - $8056000

Gross Profit = $760000.

A company's gross income is another name for its Gross Profit. A company's gross profit is its profits after deducting its cost of goods sold (COGS) from its total revenue.

Gross Profit is a statistic used to assess a company's efficiency in producing and providing its goods and/or services. The more effectively a corporation is using its resources, the higher the gross profit.

Typically, only variable expenses are taken into account when determining gross profit from cost of goods sold (COGS). Variable expenses are those that are directly related to output (like material and shipping costs). Gross profit is unaffected by fixed costs (such as rent and insurance).

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Item Classification
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2. Notes payable (due in 6 to 11 months).
3. Sales taxes payable.
4. Bonus payable (to be paid in 60 days)
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6. Prepaid Insurance (6 months of coverage)
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9. Pension liability (to be fully paid to retired employees in next 11 months)
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Expected return on plan assets 54,000,000
Actual return on plan assets 44,000,000
Contributions to the pension fund (end of year) 94,000,000
Amortization of net loss 0
Pension benefits paid (end of year) 36,000,000
Pension expense 64,000,000

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Cash + Inventory + Equipment = Accounts Payable + Common Stock + Retained
Earnings
(1)
(2)
(3)

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