Question
Assume a construction company has a fixed price contract to build an office building for $25 million. Construction costs incurred in the first year were
Assume a construction company has a fixed price contract to build an office building for $25 million. Construction costs incurred in the first year were $6 million and the estimated remaining costs to complete the building in the following year were $9 million. The company recognizes and records revenue over time according to percentage of completion.
- How much revenue will appear on the companys income statement in the first year of the contract? (show calculations)
- How much gross profit will appear on the companys income statement in the first year of the contract? (show calculations)
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