Sallys construction. is a construction company and recognizes revenue, costs, and gross profit at project completion. At the start of Year 1, Kip enters a contract to build an office building for $100 million. The project is completed by the end of Year 2. The following additional information is available for this project (amounts in millions):
YEAR 1 YEAR 2
Costs incurred during each year
$20 $70
Costs expected in future
$60 0
sallys Year 2 revenue will be:
| Information Available | Amount in Mn $ | |
| Total Cost of the Project | 100 | |
| Year 1 | Year 2 | |
| Cost Incurred during each year | 20 | 70 |
| Cost Expected In Future | 60 | 0 |
| Computation of % of completion, revenue recognition (Amount in Mn $) | |||||||||
| Year | Actual cost incurred (A) | Total cost incurred till date (B) | Estimated Cost (B1) | Total estimated Cost ( C ) | % of completion (D) (B/C) | Contract Price | Total Revenue to be recoganized (F) (E * D) |
Revenue Reconginsed in Earlier
Year (G) |
Revenue for current period (H= F-G) |
| (E) | |||||||||
| Year 1 | 20 | 20 | 60 | 80 | 25.00% | 100 | 25 | 0 | 25 |
| Year 2 | 70 | 90 | 0 | 90 | 100.00% | 100 | 100 | 25 | 75 |
Sallys Year 2 revenue will be: $ 75 Mn
Get Answers For Free
Most questions answered within 1 hours.