In: Accounting
Indiana Co. began a construction project in 2021 with a contract
price of $161 million to be received when the project is completed
in 2023. During 2021, Indiana incurred $37 million of costs and
estimates an additional $81 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.
In 2022, Indiana incurred additional costs of $57 million and
estimated an additional $40 million in costs to complete the
project. Indiana (Do not round your percentage
calculated):
A. Recognized $25.50 million gross profit on the project in 2022.
B. Recognized $6.00 million gross profit on the project in 2022.
C. Recognized $27.00 million gross profit on the project in 2022.
D. Recognized $5.46 million gross profit on the project in 2022.
>Amount is in $ millions
Working |
Year end 2021 |
Year end 2022 |
|
A |
Contract Price |
$ 161.00 |
$ 161.00 |
B |
Cost Incurred to Date |
$ 37.00 |
$ 94.00 |
C |
Estimated cost yet to be incurred to complete the contract |
$ 81.00 |
$ 40.00 |
D = B+C |
Total Cost |
$ 118.00 |
$ 134.00 |
E = (B/D) x 100 |
% of Completion |
31.36% |
70.15% |
F = A x E |
Revenue to date |
$ 50.48 |
$ 112.94 |
G |
Revenue of Previous year |
$ - |
$ 50.48 |
H = F - G |
Net Revenue this year |
$ 50.48 |
$ 62.46 |
I (=B) |
Cost to date |
$ 37.00 |
$ 94.00 |
J |
Cost to date of previous year |
$ - |
$ 37.00 |
K = I - J |
Net Cost for the year |
$ 37.00 |
$ 57.00 |
L = H - K |
Gross Profits |
$ 13.48 |
$ 5.46 ANSWER |