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 gross profit related to the project have they recognized to date?

Question

Quizplus · Accepted Answer

The percentage-of-completion method calculates revenue based on the project's progress. Here, progress is $300,000 / $1,200,000 = 25%. Total expected profit is $1,600,000 - $1,200,000 = $400,000. Thus, recognized profit to date is 25% of $400,000 = $100,000.