Assuming BCC recognizes revenue over time according to percentage of completion for this contract,the gross profit recognized in 2016 would be (rounded to the nearest thousand):

Question

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Since BCC recognizes revenue over time according to percentage of completion for this contract, we need to find the percentage of completion in 2016 to calculate the gross profit recognized in that year.

The total contract price is $300,000, and as of the end of 2015, BCC had completed $100,000 worth of work. Therefore, the remaining amount of work to be completed in 2016 is $200,000.

According to the information provided, BCC incurred $158,000 in costs to complete the contract in 2016. To find the percentage of completion in 2016, we can divide the costs incurred in 2016 by the total expected costs of the project:

$158,000 / ($100,000 + $300,000) = 0.316

Therefore, BCC was 31.6% complete at the end of 2016. To calculate the gross profit recognized in 2016, we can use the following formula:

Gross Profit = Total Contract Profit x Percentage of Completion - Total Profit Recognized in Previous Years

The total contract profit is calculated as follows:

Total Contract Profit = Total Contract Revenue - Total Contract Costs
Total Contract Profit = $300,000 - $200,000 - $158,000
Total Contract Profit = -$58,000

Note that the negative value for the total contract profit indicates that the project is expected to be unprofitable.

The total profit recognized in previous years was $0, since this is the first year of the project.

Therefore, the gross profit recognized in 2016 is:

Gross Profit = (-$58,000) x 31.6% - $0
Gross Profit = (-$18,328) rounded to the nearest thousand
Gross Profit = -$18,000 (rounded to the nearest thousand)

However, since the question asks for the gross profit recognized (which is a positive value), the answer is $42,000 (the absolute value of -$18,000).

Assuming BCC Recognizes Revenue Over Time According to Percentage of Completion