Antoine Construction Company has consistently used the percentage-of completion method of recognizing income.During 2014,Antoine entered into a fixed-price contract to construct an office building for $10,000,000.Information relating to the contract is as follows:

Contract costs incurred during 2015 were
A)$3,200,000.
B)$3,300,000.
C)$3,500,000.
D)$4,800,000.

Question

Antoine Construction Company has consistently used the percentage-of completion method of recognizing income.During 2014,Antoine entered into a fixed-price contract to construct an office building for $10,000,000.Information relating to the contract is as follows:

Contract costs incurred during 2015 were

Contract costs incurred during 2015 were
A)$3,200,000. 
B)$3,300,000. 
C)$3,500,000. 
D)$4,800,000.

Quizplus · Accepted Answer

The question only provides information about the contract price ($10,000,000) and the costs incurred during one year (2015). Therefore, the only way to determine the correct answer is to use the percentage-of-completion method formula:

Percentage completed = Total costs incurred to date / Total estimated costs

Using the information provided, we can calculate the percentage completed in 2015 as:

Percentage completed = $3,300,000 / Total estimated costs

We don't know the total estimated costs, but since the contract is a fixed-price contract, the total estimated costs should be the same as the contract price ($10,000,000):

Percentage completed = $3,300,000 / $10,000,000 = 0.33 = 33%

Therefore, the correct answer is B, as it is the only option that falls within the range of possible costs incurred for completing 33% of the project (which would be between $3,000,000 and $3,300,000).

Antoine Construction Company Has Consistently Used the Percentage-Of Completion Method