Question

Nash Construction Company uses the percentage-of-completion method of accounting. In 2017, Nash began work under contract #E2-D2, which provided for a contract price of $2,234,000. Other details follow:

		2017		2018
Costs incurred during the year		$615,980		$1,420,000
Estimated costs to complete, as of December 31		1,005,020		–0–
Billings to date		413,000		2,234,000
Collections during the year		351,000		1,530,000

(a)

What portion of the total contract price would be recognized as revenue in 2017? In 2018?

Revenue recognized in 2017		$
Revenue recognized in 2018

Answer 1

Revenue recognition is calculated by.

1. Percentage completion

Total expenses incurred / total cost to be incurred

2. Contract value * %completed.

For 2017

1. % completed is .615980/615980+1005020

=615980/1621000 = 38 %

2. Revenue to be recognised is 2234000*38%=$848920

For 2018

1. % completed is 100 %

Revenue to be recognised bis $2234000

But recognise already in 2017 is 848920$

Therefore for 2018 revenue to be recognised is.

2234000-848920 =$1385080

Pls like if logic explained