Arab Construction Company began work in 2021 on contract XXXX, which provided for a contract price of€19,200,000. Other details follow:2021Costs incurred during the yearEstimated costs to complete, as of December 31Billings during the yearCollections during the yearOA €1,200,000.B. €1,600,000.C. €4,800,000.€3,200,0009,600,0003,600,0002,400,000Assume that Arab uses the percentage-of-completion method of accounting. The portion of the total gross profitto be recognized as income in 2021 isD. €6,400,000€9,800,000014,400,00015,600,000202GUR OM

Lets understand the basics.In percentage of completion method, revenue get recognized based on the…

Arab Construction Company began work in 2021 on contract XXXX, which provided for a contract price of €19,200,000. Other details follow: 2021 202 Costs incurred during the year Estimated costs to complete, as of December 31 Billings during the year Collections during the year O A €1,200,000. €3,200,000 9,600,000 3,600,000 2,400,000 Assume that Arab uses the percentage-of-completion method of accounting. The portion of the total gross profit to be recognized as income in 2021 is B. €1,600,000. €9,800,000 0 14,400,000 15,600,000

Arab Construction Company began work in 2021 on contract XXXX, which provided for a contract price of €19,200,000. Other details follow: 2021 202 Costs incurred during the year Estimated costs to complete, as of December 31 Billings during the year Collections during the year O A €1,200,000. €3,200,000 9,600,000 3,600,000 2,400,000 Assume that Arab uses the percentage-of-completion method of accounting. The portion of the total gross profit to be recognized as income in 2021 is B. €1,600,000. €9,800,000 0 14,400,000 15,600,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.

Question

Arab Construction Company began work in 2021 on contract XXXX, which provided for a contract price of
€19,200,000. Other details follow:
2021
Costs incurred during the year
Estimated costs to complete, as of December 31
Billings during the year
Collections during the year
OA €1,200,000.
B. €1,600,000.
C. €4,800,000.
€3,200,000
9,600,000
3,600,000
2,400,000
Assume that Arab uses the percentage-of-completion method of accounting. The portion of the total gross profit
to be recognized as income in 2021 is
D. €6,400,000
€9,800,000
0
14,400,000
15,600,000
202
GUR OM

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