Use the following information for questions 83 and 84.
Eilert Construction Company had a contract starting April 2015, to construct a $21,000,000 building that is expected to be completed in September 2016, at an estimated cost of $19,250,000. At the end of 2015, the costs to date were $8,855,000 and the estimated total costs to complete had not changed. The progress billings during 2015 were $4,200,000 and the cash collected during 2015 was $2,800,000. Eilert uses the percentage-of-completion method.
-For the year ended December 31, 2015, Eilert would recognize gross profit on the building of
A) $0.
B) $737,917.
C) $805,000.
D) $945,000.

Question

Quizplus · Accepted Answer

The percentage of completion is calculated as costs to date ($8,855,000) divided by total estimated costs ($19,250,000), which is approximately 46%. The revenue recognized is 46% of the contract price ($21,000,000), which is $9,660,000. The costs incurred are $8,855,000, so the gross profit recognized is $9,660,000 - $8,855,000 = $805,000.

Use the Following Information for Questions 83 and 84