Kiner, Inc. began work in 2014 on a contract for $16,800,000. If Kiner uses the
ID: 2426197 • Letter: K
Question
Kiner, Inc. began work in 2014 on a contract for $16,800,000. If Kiner uses the percentage of completion method, the revenue and gross profit to be recognized is:
2014 2015
Costs Incurred to Date $7,200,000 $11,200,000
Estimated costs to complete $4,800,000
Billings to Date $5,600,000 $16,800,000
Collections to Date $4,000,000 $14,400,000
Revenue
Gross Profit
Explanation / Answer
Total estimated gross profit
= Total contract cost –[Total cost incurred to date+ estimated costs to complete]
= $16,800,000-[ $7,200,000 + $4,800,000 ]
=$16,800,000 -$12,000,000
=$4,800,000
% complete = Total construction costs to date/Total estimated costs of contract
Year 2014= $7,200,000 /$12,000,000 x 100
=60%
Gross profit to date = % complete X Total estimated gross profit
Year 2014:
Gross profit=$4,800,000 x 60%=$2,880,000
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