16. Red Builders agrees to construct a new building for Blue Co. for a total contract price of $6,000,000. The estimated construction costs at inception was $4,000,000. The construction project was completed after two years. Below are the actual costs for years 1 and 2: DescriptionCumulative Year 1Year 2Cost incurred to date1,200,0002,500,000Estimated additional costs to complete3,600,0002,100,000Billings1,050,0002,300,000Cash Collections1,000,0001,900,000 Red has determined that this contract qualifies for revenue recognition over time (as opposed to upon completion). As a result, Red Builders should have recognized profit at the end of year 1 in the amount of:

YEAR 1 YEAR 2 Cost incurred to date (1)…

Answered: d Builders agrees to construct a new…

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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16.

Red Builders agrees to construct a new building for Blue Co. for a total contract price of $6,000,000. The estimated construction costs at inception was $4,000,000. The construction project was completed after two years. Below are the actual costs for years 1 and 2:

Description	Cumulative
	Year 1	Year 2
Cost incurred to date	1,200,000	2,500,000
Estimated additional costs to complete	3,600,000	2,100,000
Billings	1,050,000	2,300,000
Cash Collections	1,000,000	1,900,000

Red has determined that this contract qualifies for revenue recognition over time (as opposed to upon completion). As a result, Red Builders should have recognized profit at the end of year 1 in the amount of:

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