Help Save&ExitSu; Indiana Co. During 2018, Indiana incurred $38 mition of costs
ID: 2552616 • Letter: H
Question
Help Save&ExitSu; Indiana Co. During 2018, Indiana incurred $38 mition of costs and estimates revenue over time and for this project recognizes revenue over time according to the began a construction project in 2018 with a contract price of $163 million to be received when the project is completed in 2020 an additional $86 million of costs to complete the project, Indiana recognizes percentage of the project that has been completed Suppose that, in 2019, Indiana incurred additional costs of $63 million and estimated an additional $54 million in costs to Indiana (Do not round your percentage calculated) complete the project Multiple Choice Recognized $6.74 miion gross prot on the project in 2019 Recognized $6.74 million loss on the project in 20 Prev10 of 10 N 8 9Explanation / Answer
Calculate the Profit to be recognized in Year 2018
The percentage completion for the year 2016 can be calculated as follows:
Percentage Completion (2018) = Costs Incurred/Total Estimated Costs * 100 = 38/(38 + 86)*100 = 30.65%
Gross Profit (2018) = Contract Price - Total Estimated Costs = 163 - (38 + 86) = 39 million
Gross Profit Recognized in 2018 = 39 million * 30.65% = 11.95 million
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Calculate the Profit to be recognized in Year 2019
Percentage Completion (2019) = Costs Incurred/Total Estimated Costs*100 = (38+63/(31+63+54)*100 = 65.16%
Estimated Gross Profit (2019) = Contract Price - Total Estimated Costs = 163 - (31+63+54) = 8 million
Gross Profit To Date = 8 million* 65.16% = $5.21million
$11.95 million was recognized in 2016. In order to arrive at the value of $5.21 million gross profit to date, a loss of $6.74 (5.21 – 11.95) million will have to be recognized on the project in 2019.
Recognized $6.74 million loss on the project in 2019(answer, which is Option B)
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