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Setler79 [48]
3 years ago
6

A construction company entered into a fixed-price contract to build an office building for $28 million. Construction costs incur

red during the first year were $8 million and estimated costs to complete at the end of the year were $12 million.The building was completed during the second year. Construction costs incurred during the second year were $13 million.How much revenue and gross profit or loss will the company recognize in the first and second year if it recognizes revenue upon contract completion
Business
1 answer:
Radda [10]3 years ago
4 0

Answer:

$3.2 million

Explanation:

The revenue and gross profit or loss which the company identify in the first and second year if it recognizes revenue upon contract completion is calculated below.

Total costs = Incurred costs + estimated costs to complete = $8 million + $12 million = $20 million

Revenue to recognize = $8m/$20m*$28m = $11.2 million

Gross Profit = Revenue recognized less costs incurred

= $11.2m - $8m = $3.2 million

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