Ask Question
21 September, 16:11

Crane Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1450000 each quarter. The total contract price is $18168000 and Crane estimates total costs of $17250000. Crane estimates that the building will take 3 years to complete, and commences construction on January 2, 2018. At December 31, 2018, Seasons estimates that it is 30% complete with the construction, based on costs incurred. What is the total amount of Revenue and Profit from Long-Term Contracts recognized for 2018?

+5
Answers (1)
  1. 21 September, 16:36
    0
    Revenue recognized for 2018 is $5,450,400

    Profit for the same year is $275,400

    Explanation:

    The is a method of revenue recognition known as cost to completion. It is used to recognize revenue from long term projects which are mostly construction contracts that will not be completed in a year. In this system, the revenue to be recognized is a function of the cost.

    As such, where 30% of the total cost of the project is incurred in the first year, 30% of the total revenue will also be recognized in the first year. The difference between the revenue and the cost gives the profit.

    Given that total revenue for 3 years is $18168000

    Revenue to be recognized

    = 30/100 * $18,168,000

    = $5,450,400

    Cost incurred

    = 30/100 * $17,250,000

    = $5,175,000

    Profit for 2018

    = $5,450,400 - $5,175,000

    = $275,400
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Crane Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers