Question

Questions 17-18 DIRECTIONS: Answer Questions 17 through 18 based on the information below. A contract has been awarded to the low bidder. This contractor will then commence con struction of a building for the total contract price of $30,000,000. The expected cost of con struction is $27,510,000. You are given the additional facts: 2016 2017 2018 Contract Price as above $ 30,000,000 $30,000,000 $30,000,000 $ 9,170,000 Actual Cost to date $13,755,000 $27,510,000 Estimated Cost to complete 18.340,000 13.755.000 Estimated Total Cost $ 27,510,000 $ 27,510,000 $ 27,510,000 Estimated Total Income $ 2.490,000 Billings $ 9,000,000 $ 9,000,000 $ 9,000,000 17 For 2016, the income to be recognized on a percentage-of-completion basis would be B. $2,490,000 c. $3,000,000 D. $9,000,000 come to be recognized by the contractor on a percentage-of-completion 18. For 2017, the income to be recognized by the contractor basis would be A $415,000 B. $424,500 c. $830,000 D. $1.245.000 A $830,000

Answer 1

17) % of completion for 2016 is = (Actual cost to date/(Actual cost to date Estimated cost to complet))*100 % of completion for 2016 is = (9170000/(9170000+18340000)) *100 % of completion for 2016 is = 33.33% Income under percentage completion basis for the year 2016 :- Particulars Amount $ Revenue to be recognised (Contract price * % completed) 1,00,00,000 (30000000 33.33%) Less: Actual cost incurred in 2016 91,70,000 Income to be recognised 8,30,000 18) % of completion for 2017 is = (Actual cost to date/(Actual cost to date Estimated cost to complet))*100 % of completion for 2017 is (13755000/(13755000+13755000)) *100 = % of completion for 2017 is = 50% Income under percentage completion basis for the year 2017 :- Particulars Amount $ Revenue to be recognised (Contract price * % completed) 1,50,00,000 (30000000*50% Less: Actual cost incurred in 2017 1,37,55,000 Cumulative Income to be recognised 12,45,000 Less: Income recognised in 2016 8,30,000 Income to be recognised in 2017 4,15,000