Indiana Co. began a construction project in 2018 with a contract price of $162 m
ID: 2562191 • Letter: I
Question
Indiana Co. began a construction project in 2018 with a contract price of $162 million to be received when the project is completed in 2020. During 2018, Indiana incurred $34 million of costs and estimates an additional $87 million of costs to complete the project. Indiana recognizes revenue over time and for this project recognizes revenue over time according to the percentage of the project that has been completed.
Suppose that, in 2019, Indiana incurred additional costs of $66 million and estimated an additional $52 million in costs to complete the project. Indiana (Do not round your percentage calculated):
Multiple Choice
Recognized $4.94 million gross profit on the project in 2019.
Recognized $3.00 million loss on the project in 2019.
Recognized $4.94 million loss on the project in 2019.
Recognized $7.94 million gross profit on the project in 2019.
Explanation / Answer
S.No
Particulars
2018
2019
(a)
Total Cost till date
34
100
(34+66)
(b)
Estimated Cost of Completion
87
52
(c)
Total Cost of Completion [(a) + (b)]
121
152
(d)
Percentage Completion [[(a)/(c)]*100]
28.10%
65.79%
(e)
Sales revenue
162
(f)
Revenue to be recognised each year [(e)*(d)]
45.52
106.58
(g)
Less:Revenue recognised in previous year
45.52
(i)
Revenue to be recognised in 2019
61.06
(k)
Less: Cost incurred in 2019
66
(l)
Loss to be recognised in 2019
-4.94
Therefore, the right option is (c)
S.No
Particulars
2018
2019
(a)
Total Cost till date
34
100
(34+66)
(b)
Estimated Cost of Completion
87
52
(c)
Total Cost of Completion [(a) + (b)]
121
152
(d)
Percentage Completion [[(a)/(c)]*100]
28.10%
65.79%
(e)
Sales revenue
162
(f)
Revenue to be recognised each year [(e)*(d)]
45.52
106.58
(g)
Less:Revenue recognised in previous year
45.52
(i)
Revenue to be recognised in 2019
61.06
(k)
Less: Cost incurred in 2019
66
(l)
Loss to be recognised in 2019
-4.94
Therefore, the right option is (c)