Exhibit 18-1 In 2010, Alpha Construction began work on a contract with a price of $850, 000 and estimated costs of $595, 000.Data for each year of the contract are as follows:
$\begin{array}{llll}
&2010&2011&2012\
\text { Costs incurred chring the year } & \$ 238,000 & \$ 319,600 & \$ 105,000 \
\text { Estimated costs to complete } & 357,000 & 139,400 & -0- \
\text { Partial billings } & 260,000 & 210,000 & 380,000 \
\text { Collections } & 240,000 & 200,000 & 410,000
\end{array}$

-Refer to Exhibit 18-1.Under the percentage-of-completion method of revenue recognition, the balance in Construction in Progress at the end of 2011 would be
A)$557, 600
B)$659, 600
C)$680, 000
D)$782, 000

Question

Exhibit 18-1 In 2010, Alpha Construction began work on a contract with a price of $850, 000 and estimated costs of $595, 000.Data for each year of the contract are as follows:
$\begin{array}{llll}
&2010&2011&2012\
\text { Costs incurred chring the year } & \$ 238,000 & \$ 319,600 & \$ 105,000 \
\text { Estimated costs to complete } & 357,000 & 139,400 & -0- \
\text { Partial billings } & 260,000 & 210,000 & 380,000 \
\text { Collections } & 240,000 & 200,000 & 410,000
\end{array}$

-Refer to Exhibit 18-1.Under the percentage-of-completion method of revenue recognition, the balance in Construction in Progress at the end of 2011 would be
A)$557, 600
B)$659, 600
C)$680, 000
D)$782, 000

Quizplus · Accepted Answer

To calculate the balance in Construction in Progress using the percentage-of-completion method, we need to first calculate the total cost incurred up to the end of 2011, which is $440,000 (2011 costs) + $250,000 (2010 costs) = $690,000. We also need to calculate the total estimated costs for the entire project, which is $595,000 (original estimated costs) * 1.1 (to adjust for the change in estimate) = $654,500. 
Next, we can calculate the percentage of completion at the end of 2011: 
Percentage of completion = Total cost incurred / Total estimated costs 
= $690,000 / $654,500 
= 1.0541 (rounded to four decimal places) 
Finally, we can calculate the balance in Construction in Progress: 
Balance in Construction in Progress = Contract price * Percentage of completion - Total billings to date 
= $850,000 * 1.0541 - $170,000 (2010 billings) - $0 (2011 billings) 
= $680,000. 
Therefore, the best choice is C.

Exhibit 18-1 in 2010, Alpha Construction Began Work on a Contract