Question

On January 1, 20x7, Porter Inc. entered into a 3-year construction contract for $2547273. The actual...

On January 1, 20x7, Porter Inc. entered into a 3-year construction contract for $2547273. The actual and expected costs to complete the project as at each year-end are outlined in the table below.

Dec 31,

20x7

Dec 31,

20x8

Dec 31,

20x9

Costs incurred during the year

$615470

$598465

$600,000

Expected costs to complete

$1200218

$421321


How much revenue should Porter Inc. recognize in relation to this contract for the fiscal year 20x8?

Select one:

a. $1027514

b. $863458

c. $1890972

d. $1494876

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Homework Answers

Answer #1

Option A

Solving as per degree of completion method-

Revenue for 2017=Cost incurred in 2017/(cost incurred in 2017+expected cost)* total contract revenue

=615470/(615470+1200218)*2547273=$863457.9

Revenue for 2018=(Cost incurred in 2018 + cost incurred in 2017)/(cost incurred in 2017+cost incurred in 2018+ expected cost)* total contract revenue-revenue booked in 2017

=(598465+615470)/(598465+615470+421321)*2547273-863457.9=$10,27,514.45=$ 1027514 (approx.)

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