Question

Cussatt Construction Company had a contract starting April 2018, to construct a $48,000,000 building that is expected to be completed in September 2020, at an estimated cost of $44,000,000. At the end of 2018, the costs to date were $20,240,000 and the estimated total costs to complete had not changed. The progress billings during 2018 were $4,800,000 and the cash collected during 2018 was $6,400,000. Cussatt uses the percentage-of-completion method. For the year ended December 31, 2018, Cussatt would recognize gross profit on the building of: A) $ 1,840,000 B) $ 1,686,666 C) $ 2,160,000 D) $   0  

Answer 1

• All working forms part of the answer
• Working

Working		2018
A	Contract Price	$     48,000,000.00
B	Cost Incurred to Date	$     20,240,000.00
C	Estimated cost yet to be incurred to complete the contract	$     23,760,000.00
D = B+C	Total Cost	$     44,000,000.00
E = (B/D) x 100	% of Completion	46.00%
F = A x E	Revenue to date	$     22,080,000.00
G	Revenue of Previous year	$                            -
H = F - G	Net Revenue this year	$     22,080,000.00
I (=B)	Cost to date	$     20,240,000.00
J	Cost to date of previous year	$                            -
K = I - J	Net Cost for the year	$     20,240,000.00
L = H - K	Gross Profits	$       1,840,000.00 = Answer

• Correct Answer = Option ‘A’ $ 1,840,000