Question

Seasons 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 $1,550,000 each quarter. The total contract price is $18,600,000 and Seasons estimates total costs of $17,750,000. Seasons estimates that the building will take 3 years to complete, and commences construction on January 2, 2018. 18). Seasons Construction completes the remaining 25% of the building construction on December 31, 2020, as scheduled. At that time the total costs of construction are $18,750,000.
What is the total amount of Revenue from Long-Term Contracts and Construction Expenses that Seasons will recognize for the year ended December 31, 2020?


Revenue Expenses

(A) $18,600,000 $18,750,000

(B) $4,650,000 $ 4,687,500

(C) $4,650,000 $ 5,250,000

(D) $4,687,500 $ 4,687,500

Answer 1

Answer:

(C) $4,650,000 $ 5,250,000

Explanation:

total contract price is $ 18,600,000

season construction using percentage of completion method.

Amount of revenue & construction expense for the year ended december 31, 2020 will be

25% of $ 18,600,000 revenue = $ 4,650,000

25% of $ 18,750,000 total cost = $5,250,000