Red Builders agrees to construct a new building for Blue Co. for a total contract...
60.1K
Verified Solution
Link Copied!
Question
Accounting
Red Builders agrees to construct a new building for Blue Co. for a total contract price of $6,000,000. The estimated construction costs at inception was $4,000,000. The construction project was completed after three years. Below are the actual costs for years 1 and 2:
Description
Cumulative
Year 1
Year 2
Cost incurred to date
1,200,000
2,500,000
Estimated additional costs to complete
3,600,000
2,100,000
Billings
1,050,000
2,300,000
Cash Collections
1,000,000
1,900,000
Red has determined that this contract qualifies for revenue recognition over time (as opposed to upon completion). As a result, Red Builders should have recognized profit at the end of year 2 in the amount of:
$3,260,870
$1,760,870
$460,870
None of the above
$760,870
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
