Question

Indiana Co. began a construction project in 2021 with a contract price of $164 million to be received when the project is completed in 2023. During 2021, Indiana incurred $38 million of costs and estimates an additional $83 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:

A. Recognized no gross profit or loss on the project in 2021.

B. Recognized $81.00 million loss on the project in 2021.

C. Recognized $38.00 million loss on the project in 2021.

D. Recognized $13.50 million gross profit on the project in 2021.

Answer 1

• Correct Answer = Option ‘D’ recognise $ 13.50 million gross profit in 2021
• Working

Working		Year end 2021 [Amount in MILLIONS]
A	Contract Price	$                   164.00
B	Cost Incurred to Date	$                     38.00
C	Estimated cost yet to be incurred to complete the contract	$                     83.00
D = B+C	Total Cost	$                   121.00
E = (B/D) x 100	% of Completion	31.40%
F = A x E	Revenue to date	$                     51.50
G	Revenue of Previous year	$                            -
H = F - G	Net Revenue this year	$                     51.50
I (=B)	Cost to date	$                     38.00
J	Cost to date of previous year	$                            -
K = I - J	Net Cost for the year	$                     38.00
L = H - K	Gross Profits	$                     13.50 ANSWER