Tullis Construction enters into a long-term fixed price contract to build an off

Question

Tullis Construction enters into a long-term fixed price contract to build an office tower for $10,000,000. In the first year of the contract Tullis incurs $3,000,000 of cost and the engineers determined that the remaining costs to complete are $5,000,000. Tullis billed $4,000,000 in year 1 and collected $3,500,000 by the end of the end of the year. 19. How much gross profit should Tullis recognize in Year 1 assuming the use of the percentage-of-completion method? A. 0 B. 2,000,000 C. 750,000 D. 2,500,000 Tullis Construction enters into a long-term fixed price contract to build an office tower for $10,000,000. In the first year of the contract Tullis incurs $3,000,000 of cost and the engineers determined that the remaining costs to complete are $5,000,000. Tullis billed $4,000,000 in year 1 and collected $3,500,000 by the end of the end of the year. 19. How much gross profit should Tullis recognize in Year 1 assuming the use of the percentage-of-completion method? A. 0 B. 2,000,000 C. 750,000 D. 2,500,000

Explanation / Answer

= 3/8 * 100% = 37.5 %  

Revenue recognised = 37.5% of $10,000,000 = $ 3,750,000

Option C

Percentage of Work Completed = Expenditures Incurred from Inception to Date / Total Estimated Costs for the Contract

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