Question

B30 - x fx С D E F G 9 B 1 On January 1, 2020, Construction Co. enters into a contract with Trump Co. to build a new high-rise 2 building for $10,000,000. The contract allows Construction Co. to make monthly progress billings as 3 work progresses on the projects. Following is information on the contract for 2020. 4 2020 5 Construction costs incurred during the year $3,000,000 6 Construction costs incurred in prior years So 7 Cumulative construction costs incurred as of year-end $3,000,000 8 End of year estimate of costs to complete the job ? Year-end estimate of total job cost ? 10 11 Progress billings during the year S2,850,000 12 Cash collections during the year 2 13 Following is information on the financial statement presentation of the contract in the 2020 financial 14 statements 15 16 Balance Sheet (12/31/2020) 17 Current assets: 18 Accounts receivable $427,500 19 Costs and profits in excess of billings $900,000 20 21 22 Required: Answer the following questions. 23 24 1. What amount of construction revenue was reported in the 2020 income statement? 25 26 2. What must have been the amount of cash collections during the year! 27 28 3. What must have been the year-end estimate of costs to complete the job? 29 4. What fraction of the job was finished as of December 31st (enter as fractional value; 30.0.25, not 25%) 31 32 33 34 35 1 2 3 37 38 39

Answer 1

Answer 1
Cost and profits in excess of billings	$          900,000
Add: Progress billings during the year	$      2,850,000
Total of cost and profits	$      3,750,000
Revenue = Total of cost and profits	$      3,750,000
Answer 2
Progress billings during the year	$      2,850,000
Less: Accounts receivable at the end	$          427,500
Cash collections during the year	$      2,422,500
Answer 3
Revenue	$      3,750,000
Divided by: Total contract value	$    10,000,000
Percentage of completion	37.50%
Cumulative cost incurred at end of year	$      3,000,000
Divided by: Percentage of completion	37.50%
Estimated total costs	$      8,000,000
Estimated total costs	$      8,000,000
Less: Cumulative cost incurred at end of year	$      3,000,000
Estimated costs to complete as of year-end	$      5,000,000
Answer 4
Percentage of completion	37.50%
Percentage of completion	0.3750
Percentage of completion (Rounded)	0.38