Indiana Co. began a construction project in 2021 with a contract price of $161 million to...
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Indiana Co. began a construction project in 2021 with a contractprice of $161 million to be received when the project is completedin 2023. During 2021, Indiana incurred $37 million of costs andestimates an additional $81 million of costs to complete theproject. Indiana recognizes revenue over time and for this projectrecognizes revenue over time according to the percentage of theproject that has been completed.
In 2022, Indiana incurred additional costs of $57 million andestimated an additional $40 million in costs to complete theproject. Indiana (Do not round your percentagecalculated):
A. Recognized $25.50 million gross profit on the project in2022.
B. Recognized $6.00 million gross profit on the project in2022.
C. Recognized $27.00 million gross profit on the project in2022.
D. Recognized $5.46 million gross profit on the project in2022.
Indiana Co. began a construction project in 2021 with a contractprice of $161 million to be received when the project is completedin 2023. During 2021, Indiana incurred $37 million of costs andestimates an additional $81 million of costs to complete theproject. Indiana recognizes revenue over time and for this projectrecognizes revenue over time according to the percentage of theproject that has been completed.
In 2022, Indiana incurred additional costs of $57 million andestimated an additional $40 million in costs to complete theproject. Indiana (Do not round your percentagecalculated):
A. Recognized $25.50 million gross profit on the project in2022.
B. Recognized $6.00 million gross profit on the project in2022.
C. Recognized $27.00 million gross profit on the project in2022.
D. Recognized $5.46 million gross profit on the project in2022.
Answer & Explanation Solved by verified expert
- Correct Answer = Option ‘D’ Recognise $ 5.46 millions in 2022
- Working
>Amount is in $ millions
|
Working |
Year end 2021 |
Year end 2022 |
|
|
A |
Contract Price |
$ 161.00 |
$ 161.00 |
|
B |
Cost Incurred to Date |
$ 37.00 |
$ 94.00 |
|
C |
Estimated cost yet to be incurred to complete the contract |
$ 81.00 |
$ 40.00 |
|
D = B+C |
Total Cost |
$ 118.00 |
$ 134.00 |
|
E = (B/D) x 100 |
% of Completion |
31.36% |
70.15% |
|
F = A x E |
Revenue to date |
$ 50.48 |
$ 112.94 |
|
G |
Revenue of Previous year |
$ - |
$ 50.48 |
|
H = F - G |
Net Revenue this year |
$ 50.48 |
$ 62.46 |
|
I (=B) |
Cost to date |
$ 37.00 |
$ 94.00 |
|
J |
Cost to date of previous year |
$ - |
$ 37.00 |
|
K = I - J |
Net Cost for the year |
$ 37.00 |
$ 57.00 |
|
L = H - K |
Gross Profits |
$ 13.48 |
$ 5.46 ANSWER |
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