Computing Income Statement Effect of Revenue Recognition on Long-Term Construction Contract On January 1, BuilderOne Inc. enters into a contract with a customer to redesign and update an office building for a price of $\$ 2,400,000 $. The construction is estimated to take three years at a total estimated cost of $\$ 2,000,000 $. Costs incurred during the year total $\$ 400,000 $. Determine the revenue and expense amounts to be recognized in the income statement during the year assuming that the company appropriately recognizes revenue at a point in time.

Computing Income Statement Effect of Revenue Recognition on Long-Term Construction Contract On January 1, BuilderOne Inc. enters into a contract with a customer to redesign and update an office building for a price of $\$ 2,400,000 $. The construction is estimated to take three years at a total estimated cost of $\$ 2,000,000 $. Costs incurred during the year total $\$ 400,000 $. Determine the revenue and expense amounts to be recognized in the income statement during the year assuming that the company appropriately recognizes revenue at a point in time.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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In 2021, Montana Corp. entered into a contract to begin work on a two-year project. Montana recognizes revenue over time according to percentage of completion for this contract, and provides the following information (dollars in millions): Accounts receivable, 12/31/2021 (from construction progress billings) $37.5 $140 Actual construction costs incurred in 2021 Cash collected on project during 2021 $105 Construction in progress, 12/31/2021 $210 Estimated percentage of completion during 2021 Selected Amounts O $70,000,000 What is the amount of gross profit on the project recognized by Montana during 2021? O $60,000,000 $35,000,000 O $105,000,000 50 %
M5-13. Computing Revenues under Long-Term Contracts Camden Corporation agreed to build a warehouse for a client at an agreed contract price of $900,000. Ex- pected (and actual) costs for the warehouse follow: 2016, $202,500; 2017, $337,500; and 2018, $135,000. The company completed the warehouse in 2018. Compute revenues, expenses, and income for each year 2016 through 2018, and for all three years combined, using the cost-to-cost method.