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Red Builders agrees to construct a new building for Blue Co….

Posted byAnonymous October 22, 2021January 11, 2024

Questions

Red Builders аgrees tо cоnstruct а new building fоr Blue Co. for а total contract price of $6,000,000. The estimated construction costs at inception was $4,000,000. The construction project was completed after two years. Below are the actual costs for years 1 and 2:Description                                                                              Cumulative                                                                                        Year 1                   Year 2Cost incurred to date                                              1,200,000          2,500,000Estimated costs to complete                                  3,600,000         2,100,000Billings                                                                       1,050,000         2,300,000Cash Collections                                                      1,000,000         1,900,000 Red has determined that this contract qualifies for revenue recognition while the performance obligation is being met. As a result, Red Builders should have recognized profit at the end of year 1 in the amount of:A. $300,000B. $600,000C. $1,050,000D. $1,000,000

Red Builders аgrees tо cоnstruct а new building fоr Blue Co. for а total contract price of $6,000,000. The estimated construction costs at inception was $4,000,000. The construction project was completed after two years. Below are the actual costs for years 1 and 2:Description                                                                              Cumulative                                                                                        Year 1                   Year 2Cost incurred to date                                              1,200,000          2,500,000Estimated costs to complete                                  3,600,000         2,100,000Billings                                                                       1,050,000         2,300,000Cash Collections                                                      1,000,000         1,900,000 Red has determined that this contract qualifies for revenue recognition while the performance obligation is being met. As a result, Red Builders should have recognized profit at the end of year 1 in the amount of:A. $300,000B. $600,000C. $1,050,000D. $1,000,000

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