On January 1, Year 1, a contractor began work on a $3.2 million construction contract that is expected to be completed in 3 years. The contractor concludes that it is appropriate to recognize revenue over time using the input method based on costs incurred (cost-to-cost method). At the inception date, the estimated cost of construction was $2.4 million. The following data relate to the actual and expected construction costs: Year 1 Year 2 Year 3
Cost incurred $720,000 $1,170,000 $1,110,000
Expected future costs $1,680,000 $810,000 $0
For this long-term construction contract, the contractor needs to calculate the estimated dollar values of the revenue and gross profit (loss) to be recognized each year.
Complete the contractor's long-term construction contract using the information above.
Revenue Gross Profit (loss)
Year 1
Year 2
Year 3

Contractor's Long-term Construction Contract Table:

                 Revenue     Gross Profit (loss)

Year 1       $960,000       $240,000

Year 2    $1,386,667        $216,667

Year 3      $853,333      ($256,667)

Total     $3,200,000      $200,000

Explanation:

a) Data and Calculations:

Contract price = $3.2 million

Estimated cost of construction = $2.4 million

Actual and expected construction costs:

                                           Year 1       Year 2       Year 3

Cost incurred                  $720,000 $1,170,000 $1,110,000

Expected future costs $1,680,000    $810,000             $0

Revenue                        $

Year 1 = $720,000/$2,400,000 * $3.2 million = $960,000

Year 2 = $1,170,000/$2,700,000 * $3.2 million = $1,386,667

Year 3 = $853,333

                 Revenue     Gross Profit (loss)

Year 1       $960,000       $240,000 ($960,000 - $720,000)

Year 2    $1,386,667        $216,667 ($1,386,667 - $1,170,000)

Year 3      $853,333      ($256,667) ($853,333 - $1,110,000)

Total     $3,200,000      $200,000 ($3,200,000 - $3,000,000)

answer; ///i believe the correct answer is (c) laissez-faire;

it's actually a very difficult task, due to not many people can make 2 million dollars in 2 years. besides that, to the not-so-realistic ideas, you can create a business. it could be practically anything, but make it into a business that isn't that known yet, you get me? also, lets not forget about stock market. that's where all the good stuff happens. use investments at the beginning and begin to raise up your business or whatever you're going to do. as this is a very non-realistic idea, it's still worth the shot!