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 $500,000

Total expected costs on contract 400,000

Costs incurred in current year 60,000

Costs incurred in previous years 0

What is the amount of revenue recognized in year 1?

A.) $100,000

B.) $500,000

C.) $60,000

D.) $75,000

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16 May, 05:01

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 $500,000

Total expected costs on contract 400,000

Costs incurred in current year 60,000

Costs incurred in previous years 0

What is the amount of revenue recognized in year 1?

A.) $100,000

B.) $500,000

C.) $60,000

D.) $75,000

+4

Answers (1)

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Douglas · Answer 1

D.) $75,000

Explanation:

Amount of revenue recognized = Cost incurred to date / Estimated total cost * Contract price

Cost incurred to date=60,000

Estimated total cost=400,000

Contract price=500,000

Amount of revenue recognized = 60,000/400,000 * 500,000

=0-15 * 500,000

=$75,000

Amount of revenue recognized in year 1 is $75,000