6. 400 points value: Indiana Co. began a construction project in 2016 with a con

Question

6. 400 points value: Indiana Co. began a construction project in 2016 with a contract price of $161 million to be received when the project is completed in 2018. During 2016, Indiana incurred $39 miltion of costs and estimates an additional $89 million of costs to complete the project Indiana recognizes revenue over time and for this project recognizes revenue over time according to the percentage of the project that has been completed Indiana O Recognized $72.00 million loss on the project in 2016 O Recognized $39.00 million loss on the project in 2016 O Recognized no gross profit or loss on the project in 2016 O Recognized $10.05 miltion gross profit on the project in 2016

Explanation / Answer

Correct answer is last option (Recognized $10.05 million gross profit on the project in 2016).

Explanation;

Total costs ($39 million + $89 million) = $128 million

Contact price is given = $161 million

Estimated gross profit ($161 million – $128 million) = $33 million

Now let’s calculate percentage of the project completed in 2016;

$39 million / $128 million = 0.3047 (Approx.) or 30.47%

Now gross profit for 2016 will be as follow;

$33 million * .3047 = $10.05 million (Approx.)

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