Beaver Dam Builders Inc.has collected the following information about a dam it is building: costs to date $300,000, estimated total costs $1,200,000, estimated total revenues $1,600,000.If Beaver Dam uses the percentage-of-completion method to recognize revenue, how much revenue related to the project have they recognized to date?

Question

Quizplus · Accepted Answer

To calculate the revenue recognized to date using the percentage-of-completion method, we need to use the formula: 
(revenue recognized to date) = (total estimated revenue) x (percentage of work completed)

The percentage of work completed can be calculated as follows: 
Percentage of work completed = (costs to date) / (estimated total costs) 
Percentage of work completed = $300,000 / $1,200,000 = 0.25 or 25%

Using this percentage and the estimated total revenue, we can calculate the revenue recognized to date: 
Revenue recognized to date = $1,600,000 x 0.25 = $400,000

Therefore, the correct answer is B.