The Pickle construction division was working on one project for the 2012 fiscal

Question

The Pickle construction division was working on one project for the 2012 fiscal year. They use the percentage of completion revenue recognition method. Contract for new administration building Total Contract Amount $ 60,000,000 Contract Grant Date August 14, 2012 Construction Began September 1, 2012 Estimated Cost to Complete at beginning of contract $ 52,000,000 Estimated Time to Complete Project 2 years As of Dec 31, 2012 Construction Costs incurred to date $ 14,140,000 Billings to date $ 19,500,000 Expected costs to complete $ 36,360,000

Explanation / Answer

The revenues to be recognised is on percentage of completion
given
Estimated Time to Complete Project 2 years
Construction Began September 1, 2012
As of Dec 31, 2012 Construction Costs incurred to date $ 14,140,000
Billings to date = $ 19,500,000
Total Contract Amount = $ 60,000,000

Percentage of project completed
Costs Incurred / Total Estimated cost = % Complete = 14140000 /52,000,000 = 0.271923 = 27.20%

Revenue to be recognised
= % Complete x Total Revenue = Revenue Recognized
= $60,000,000 x 27.20% = $1,63,15,380

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