Question

Sandhill Construction Co. has consistently used the percentage-of-completion method of recognizing revenue. During 2021, Sandhill entered into a fixed-price contract to construct an office building for $24000000. Information relating to the contract is as follows:

Answer 1

Answer:

B. $5,940,000

Explanation:

2022

Estimated total cost at completion ×Percentage of completion

$19,200,000 ×45%

=$19,200,000×0.45

=$ 8,640,000

2021

Estimated total cost at completion ×Percentage of completion

$18,000,000 ×15%

=$18,000,000×0.15

=$ 2,700,000

Therefore :

$8,640,000 - $2,700,000= $5,940,000 which is the contract cost incurred in 2022