Question

Indiana Co. began a construction project in 2021 with a contract price of $165 million to be received when the project is completed in 2023. During 2021, Indiana incurred $32 million of costs and estimates an additional $87 million of costs to complete the project. Indiana recognizes revenue over time and for this project recognizes revenue over time according to the percentage of the project that has been completed.

In 2022, Indiana incurred additional costs of $52 million and estimated an additional $39 million in costs to complete the project. Indiana (Do not round your percentage calculated):

A. Recognized revenue at 42 million gross profit on the project in 2022.

B. Recognized revenue at 7 million gross profit on the project in 2022

C. Recognized revenue at 40.50  million gross profit on the project in 2022

D Recognized revenue at 16.31 million gross profit on the project in 2022

Answer 1

Answer:
Particulars	2021 (in $ million )	2022 (in $ million )
Contract Price (P)	$165	$165
Cost Incurred to Date (A)	$32	$84 ($32 + $52)
Estimated cost to be incurred to complete the contract (B)	$87	$39
Total Cost ( C ) = A + B	$119	$123
Percentage of Completion D = ( A / C ) x 100	26.89%	68.29%
Revenue to date ( D x P)	$44.37	$112.68
Revenue of Previous year	-	($44.37)
Net Revenue this year ( E)	$44.37	$68.31
Cost to date	$32	$84 ($32 + $52)
Cost to date of previous year	-	$32
Net Cost for the year (F)	$32	$52
Gross Profits (E - F)	$12.37	$16.31
From given options, option (d) is correct i.e., Recognized revenue at 16.31 million gross profit on the project in 2022