completed contract method, ch.25, stuck on a qbank q. from schweser

[Swissfox]

Hi everyone,
I am stuck on the below question. Your help would be much appreciated (there’s not details in schweser’s answer…)
An analyst has gathered the following data pertaining to Hegel Company’s construction projects, which began during 20X2:

Project 1
Project 2
Contract price
$420,000
$300,000
Costs incurred in 20X2
240,000
280,000
Estimated costs to complete
120,000
40,000
Billed to customers during 20X2
150,000
270,000
Received from customers during 20X2
90,000
250,000
If Hengel used the completed contract method, what amount of gross profit (loss) would Hengel report in its 20X2 income statement for:
response is: project 1->0
project 2-> -20’000
Thanks!!!

 

[Chimusoro]

Completed Contract Method
Under this method, no revenues or costs are recognized until the contract is completed.

im not sure if i get the question right but no cost and revenues are recognized in both contracts

 

[Oscar]

Remember: A loss under the CC method (as well under the POC method) is recognized immediately, whereas under CC a profit is recognized only under completion.
Profit of the first project: 420’ – 240’ – 120’ = 60’ –> to be recognized under completion, hence no profit in 2002
Loss of the second project: 300’ – 280’ – 40’ = -20’ –> to be recognized directly in 202
Best,
Oscar