Indiana Co. began a construction project in 2011 that will provide it $150 milli
ID: 2452892 • Letter: I
Question
Indiana Co. began a construction project in 2011 that will provide it $150 million when it is completed in
2013. During 2011, Indiana incurred $36 million of costs and estimates an additional $84 million of costs to
complete the project.
In 2012, Indiana incurred costs of $58.5 million and estimated an additional $40.5 million in costs to
complete the project. Using the percentage-of-completion method, Indiana recognized _______ on the
project in 2012.
A. $15 million gross profit
B. $6 million gross profit
C. $13.5 million gross profit
D. $1.5 million gross profit
Explanation / Answer
in 2011 Estmated profit on project=150-36-84=30
Profit recognised=30/120*36=9
In 2012 estmated profit on project=150-58.5-40.5-36=15
Profit to be recognised up to 2012=15/135*(58.5+36)=10.5
already recognised =9
so to be recognised in 2012 is 10.5-9=$1.5