Upton Company has consistently used the percentage-of-completion method of recognizing income. In 2010, Upton started on an $18,000,000 construction contract that was completed in 2012. The following information was taken from Upton's 2010 accounting records: $\begin{array}{llcc}
\text { Progress billing} &\$6,600,000 \
\text { Costsincured.} &\$5,400,000\
\text { Collections } &\$4,200,000\
\text { Estimated cost sto complete } &\$10,800,000\

\end{array}$
What amount of revenue should Upton recognize on the contract in 2010?
A) $6,000,000
B) $5,400,000
C) $9,000,000
D) $0

Question

Upton Company has consistently used the percentage-of-completion method of recognizing income. In 2010, Upton started on an $18,000,000 construction contract that was completed in 2012. The following information was taken from Upton's 2010 accounting records: $\begin{array}{llcc}
  \text {  Progress billing} &\$6,600,000  \
 \text {  Costsincured.} &\$5,400,000\
 \text { Collections } &\$4,200,000\
 \text { Estimated cost sto complete } &\$10,800,000\

\end{array}$
 What amount of revenue should Upton recognize on the contract in 2010?
A) $6,000,000
B) $5,400,000
C) $9,000,000
D) $0

Quizplus · Accepted Answer

The percentage of completion is calculated as costs incurred to date divided by total estimated costs. In this case, $5,400,000 / ($5,400,000 + $10,800,000) = 0.3333 or 33.33%. The revenue recognized is 33.33% of the total contract value, which is $18,000,000 * 0.3333 = $6,000,000.

Upton Company Has Consistently Used the Percentage-Of-Completion Method of Recognizing