In 20x1, ABC Co. was contracted to build a railroad. The contract price is equal to the total contract costs plus 25% 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: Costs incurred to date Estimated costs to complete 20x1 20x2 20x3 2,400,000 4,575,000 6,125,000 3,600,000 In 20x1 and 20x2, it was not highly profDIF25,000 125,000 that the project will be completed on time. However, in 20x3, ABC assessed that project will be completed earlier than originally expected and thus it is now highly probable that the incentive payment will be received. suspension with invalidation of grade; 3rd violation- suspension How much profit is recognized on the contract in 20x3? CMP 131
In 20x1, ABC Co. was contracted to build a railroad. The contract price is equal to the total contract costs plus 25% 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: Costs incurred to date Estimated costs to complete 20x1 20x2 20x3 2,400,000 4,575,000 6,125,000 3,600,000 In 20x1 and 20x2, it was not highly profDIF25,000 125,000 that the project will be completed on time. However, in 20x3, ABC assessed that project will be completed earlier than originally expected and thus it is now highly probable that the incentive payment will be received. suspension with invalidation of grade; 3rd violation- suspension How much profit is recognized on the contract in 20x3? CMP 131
Chapter3: Income Sources
Section: Chapter Questions
Problem 88P
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Question
![In 20x1, ABC Co. was contracted to build a railroad. The contract
price is equal to the total contract costs plus 25% thereof. However,
if the project is completed within 4 years, ABC will receive an
additional payment of 200,000. Information on the project is
shown below:
Costs incurred to date
Estimated costs to complete
20x1
2,400,000
3,600,000
20x2
20x3
4,575,000 6,125,000
1,525,000 125,000
In 20x1 and 20x2, it was not highly profDIF25,000
that the project will be
completed on time. However, in 20x3, ABC assessed that project
will be completed earlier than originally expected and thus it is now
highly probable that the incentive payment will be received.
suspension with invalidation of grade, 3rd violation- suspension
How much profit is recognized on the contract in 20x3?
CMP 131](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F446d6ab6-6d26-4f7d-83ed-b637b0769986%2F2091eef8-4a64-4950-97b7-b1eeec56c203%2F76am0w_processed.jpeg&w=3840&q=75)
Transcribed Image Text:In 20x1, ABC Co. was contracted to build a railroad. The contract
price is equal to the total contract costs plus 25% thereof. However,
if the project is completed within 4 years, ABC will receive an
additional payment of 200,000. Information on the project is
shown below:
Costs incurred to date
Estimated costs to complete
20x1
2,400,000
3,600,000
20x2
20x3
4,575,000 6,125,000
1,525,000 125,000
In 20x1 and 20x2, it was not highly profDIF25,000
that the project will be
completed on time. However, in 20x3, ABC assessed that project
will be completed earlier than originally expected and thus it is now
highly probable that the incentive payment will be received.
suspension with invalidation of grade, 3rd violation- suspension
How much profit is recognized on the contract in 20x3?
CMP 131
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