Use the following to answer question 28: Horner Construction Co. uses the percen
ID: 2459627 • Letter: U
Question
Use the following to answer question 28:
Horner Construction Co. uses the percentage-of-completion method. In 2010, Horner began work on a contract for $5,500,000; it was completed in 2011. The following cost data pertain to this contract:
Year Ended December 31
2010
2011
Cost incurred during the year
$1,950,000
$1,400,000
Estimated costs to complete at the end of year
1,300,000
—
28. The amount of gross profit to be recognized on the income statement for the year ended December 31, 2011 is ?
Year Ended December 31
2010
2011
Cost incurred during the year
$1,950,000
$1,400,000
Estimated costs to complete at the end of year
1,300,000
—
Explanation / Answer
In $ Contract Price 5500000 Construction cost 3350000 Gross Profit 2150000 Gross Profit ratio 39% Percentage of Complete Gross profit Year Cost Incurred Percentage of completion Revenue to be recognised Gross Profit 2010 19,50,000 58.21% 32,01,493 12,48,582 2011 14,00,000 41.79% 22,98,507 8,96,418 33,50,000 100.00% 55,00,000 21,45,000 The gross profit to be recognised on the income statement for the year ended December 31,2011 is $8,96,418.
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