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Eilert Construction Company had a contract starting April 2011, to construct a $15,000,000 building that is expected to be completed in September 2012, at an estimated cost of $13,750,000.At the end of 2011, the costs to date were $6,325,000 and the estimated total costs to complete had not changed.The progress billings during 2011 were $3,000,000 and the cash collected during 2011 was $2,000,000.Eilert uses the percentage-of-completion method.
-At December 31, 2011, Eilert would report Construction in Process in the amount of

Question

Quizplus · Accepted Answer

Under the percentage-of-completion method, Construction in Process is reported at the cost incurred to date plus the recognized profit. The cost incurred to date is $6,325,000. The percentage of completion is $6,325,000 / $13,750,000 = 46%. The total profit is $15,000,000 - $13,750,000 = $1,250,000. The profit recognized to date is 46% of $1,250,000 = $575,000. Therefore, Construction in Process is $6,325,000 + $575,000 = $6,900,000.

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