Griffin Constructors, Inc. has consistently used the percentage-of-completion method of recognizing income. In 2018, Gri...
Griffin Constructors, Inc. has consistently used the percentage-of-completion method of recognizing income. In 2018, Griffin started work on a $49,000,000 construction contract that was completed in 2019. The following information was taken from Griffin's 2018 accounting records:
Progress billings $15,400,000
Costs incurred 14,700,000
Collections 9,600,000
Estimated costs to complete 29,400,000
How much was the Company over/under billed for the year ended December 31, 2018 (round percentage complete to 2 decimal points (example .513655555 = .51))?
a. 770,000
b. 1,633,333
c. 9,100,000
d. 5,800,000
Homework Answers
Solution:
% of completion of 2018 = Cost incurred / Total estimated cost = $14,700,000 / ($14,700,000 + $29,400,000) = 0.33
Revenue to be recognized for 2018 = $49,000,000*0.33 = $16,170,000
Over/Under billing for 2018 = Revenue to be recognized - Progress billing = $16,170,000 - $15,400,000 = $770,000
Hence option a is correct.
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