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.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?

Answer 1

Answer:

The correct answer is "$5,580,000".

Explanation:

The given values are:

Total contract price,

= $18,600,000

Completion percentage,

= 30%

Seasons estimates,

= $17,750,000

Now,

In 2018,

The total amount of revenue will be:

= $Total \ contract \ price\times Completion \ percentage$

On substituting the given values, we get

= $18,600,000\times 30 \ percent$

= $5,580,000$ ($)