Question

In: Accounting

The meridian construction company based in College Station, TX. is currently working on the Wellborn Middle...

The meridian construction company based in College Station, TX. is currently working on the Wellborn Middle School Renovation Project. The company uses the Percentage of Completion (POC) method as the company’s accounting method. The president wants to get help from you to determine how much has been overbilled or underbilled on this project. Use the following information.

Project name: Wellborn Middle School Renovation

Contract Amount: $560,000

Total estimated cost at completion: $ 475,000

Actual costs to date: $321,000

Total billed to date: $350,000

Expert Solution

As per the percentage of completion method;

Percentage of completion = Actual cost to date / Estimated Total Cost

= $321000 / $475000

= 67.58%

Actual cost to date = $321000

Estimated Total Cost = $475000

Revenue from contract= (Contract Amount X Percentage of completion) – Total billed to date

= ( $560000 X 67.58% ) - $350000

= $378448 - $350000

= $28448

Contract Amount = $560000

Total billed to date = $350000

$28,448 is under billed as per the percentage of completion method.

(The percentage has been rounded, so that the amount can be some small variation when we take the unrounded percentage figure in these formulas)

ekkarill92 answered 1 year ago

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