Contract for new administration building Total Contract Amount $ 60,000,000 Cont

Question

Contract for new administration building Total Contract Amount $ 60,000,000 Contract Grant Date August 14, 2012 Construction Began September 1, 2012 Estimated Cost to Complete at beginning of contract $ 52,000,000 Estimated Time to Complete Project 2 years As of Dec 31, 2012 Construction Costs incurred to date $ 14,140,000 Billings to date $ 19,500,000 Expected costs to complete $ 36,360,000 The Pickle construction division was working on one project for the 2012 fiscal year. They use the percentage of completion revenue recognition method.

Explanation / Answer

The revenues to be recognised is on percentage of completion
given
Estimated Time to Complete Project 2 years
Construction Began September 1, 2012
As of Dec 31, 2012 Construction Costs incurred to date $ 14,140,000
Billings to date = $ 19,500,000
Total Contract Amount = $ 60,000,000

Percentage of project completed
Costs Incurred / Total Estimated cost = % Complete = 14140000 /52,000,000 = 0.271923 = 27.20%

Revenue to be recognised
= % Complete x Total Revenue = Revenue Recognized
= $60,000,000 x 27.20% = $1,63,15,380

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