Rainbow Construction Company uses the percentage-of-completion method for long-term construction contracts. The company started a project with a contract price of $2,750 in 2011. Given the following data, what is the balance in Construction in Progress for this contract at the end of 2011?

A) $150
B) $400
C) $550
D) $1,750

Question

Rainbow Construction Company uses the percentage-of-completion method for long-term construction contracts. The company started a project with a contract price of $2,750 in 2011. Given the following data, what is the balance in Construction in Progress for this contract at the end of 2011?

A) $150 
B) $400 
C) $550 
D) $1,750

Quizplus · Accepted Answer

Using the percentage-of-completion method, the balance in Construction in Progress is equal to the costs incurred to date divided by the total estimated costs, multiplied by the contract price. 
For this project: 
Costs incurred in 2011 = $2,600 
Total estimated costs = $5,000 
Percentage of completion in 2011 = 52% 
($2,600/$5,000 = 0.52) 
Therefore, the balance in Construction in Progress at the end of 2011 would be: 
0.52 (contract price) = 0.52($2,750) = $1,430 
Minus the costs incurred in 2011: 
$1,430 - $880 = $550 
Thus, the answer is C.

Rainbow Construction Company Uses the Percentage-Of-Completion Method for Long-Term Construction