Green Construction Co. has consistently used the percentage-of-completion method of recognizing revenue. During 2014, Green entered into a fixed-price contract to construct an office building for $24,000,000. Information relating to the contract is as follows: Contract costs incurred during 2015 were

Question

Green Construction Co. has consistently used the percentage-of-completion method of recognizing revenue. During 2014, Green entered into a fixed-price contract to construct an office building for $24,000,000. Information relating to the contract is as follows:  Contract costs incurred during 2015 were

Quizplus · Accepted Answer

To determine the costs incurred during 2015, we need to find the difference between total costs incurred at the end of 2015 and the costs incurred at the end of 2014. At the end of 2014, the costs incurred were $0, and at the end of 2015, the costs incurred were $5,940,000 ($4,800,000 direct costs + $540,000 indirect costs + $600,000 estimated costs to complete). Therefore, the costs incurred during 2015 were $5,940,000.