Question

In: Accounting

- On December 31, 2018, State Construction Inc. signs a contract with the state of West...

- On December 31, 2018, State Construction Inc. signs a contract with the state of West Virginia Department of Transportation to manufacture a bridge over the New River. State Construction anticipates the construction will take three years. The company’s accountants provide the following contract details relating to the project:

Contract price $520 million

Estimated construction costs $400 million

Estimated total profit $120 million

During the three-year construction period, State Construction incurred costs as follows:

2019

$ 40 million

2020

$240 million

2021

$120 million

State Construction uses the percentage of completion method to recognize revenue.

How much revenue should State Construction recognize in

2019          __________________

2020          __________________

2021          __________________

Solutions

Expert Solution

--Revenues to be recorded

(Amounts are in millions)

2019

2020

2021

Revenue

$                     52.00

$                   312.00

$                      156.00

--Working

Working

Year end 2019

Year end 2020

Year end 2021

A

Contract Price

$                   520.00

$                   520.00

$                      520.00

B

Cost Incurred to Date

$                     40.00

$                   280.00

$                      400.00

C

Estimated cost yet to be incurred to complete the contract

$                   360.00

$                   120.00

$                                -  

D = B+C

Total Cost

$                   400.00

$                   400.00

$                      400.00

E = (B/D) x 100

% of Completion

10.00%

70.00%

100.00%

F = A x E

Revenue to date

$                     52.00

$                   364.00

$                      520.00

G

Revenue of Previous year

$                            -  

$                     52.00

$                      364.00

H = F - G

Net Revenue this year

$                     52.00

$                   312.00

$                      156.00

ekkarill92 answered 2 years ago
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