Rice Corp. recognizes revenue over time to account for long-term contracts and has the following information for the first year of the contract: Contract price Total expected costs on contract Costs incurred in current year Costs incurred in previous years $500,000 400,000 60,000 0

Rice Corp. recognizes revenue over time to account for long-term contracts and has the following information for the first year of the contract: Contract price Total expected costs on contract Costs incurred in current year Costs incurred in previous years $500,000 400,000 60,000 0

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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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

Rice Corp. recognizes revenue over time to account
for long-term contracts and has the following
information for the first year of the contract:
Contract price
Total expected costs on contract
Costs incurred in current year
Costs incurred in previous years
$500,000
A.) $100,000
B.) $500,000
C.) $60,000
D.) $75,000
400,000
60,000
What is the amount of revenue recognized in year 1?

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