In 20x1, ABC Co. was contracted to build a railroad. The contract price is equal to the construction costs incurred plus 20% thereof. However, if the project is completed within 4 years, ABC will receive an additional payment of P200,000. Information on the project is shown below: 20x1 20x2 20x3 2,450,000 3,600,000 6,215,000 125,000 Costs incurred to date 4,575,000 Estimated costs to complete 1,525,000 In 20x1 and 20x2, it was not highly probable that the project will be completed on time. However, in 20x3, ABC assessed that the project will be completed earlier than originally expected and thus it is now highly probable that the incentive payment will be received.
In 20x1, ABC Co. was contracted to build a railroad. The contract price is equal to the construction costs incurred plus 20% thereof. However, if the project is completed within 4 years, ABC will receive an additional payment of P200,000. Information on the project is shown below: 20x1 20x2 20x3 2,450,000 3,600,000 6,215,000 125,000 Costs incurred to date 4,575,000 Estimated costs to complete 1,525,000 In 20x1 and 20x2, it was not highly probable that the project will be completed on time. However, in 20x3, ABC assessed that the project will be completed earlier than originally expected and thus it is now highly probable that the incentive payment will be received.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
How much revenue is recognized on the contract in 20x3?
Transcribed Image Text:In 20x1, ABC Co. was contracted to build a railroad. The contract price is equal to the construction costs
incurred plus 20% thereof. However, if the project is completed within 4 years, ABC will receive an additional
payment of P200,000. Information on the project is shown below:
20x1
20x2
20x3
Costs incurred to date
2,450,000
4,575,000
6,215,000
Estimated costs to complete
3,600,000
1,525,000
125,000
In 20x1 and 20x2, it was not highly probable that the project will be completed on time. However, in 20x3,
ABC assessed that the project will be completed earlier than originally expected and thus it is now highly
probable that the incentive payment will be received.
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