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, 2019, Seasons Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $18,000,000 due to unanticipated price increases.

What is the total amount of Construction Expenses that Seasons will recognize for the year ended December 31, 2019?

Select one:

a. $8,175,000

b. $13,500,000

c. $7,987,500

d. $7,875,000

How did my teacher calculate 30%?

($18,000,000 .75) - ($17,750,000 .30) = $8,175,000.