Sunshine Contractors started a contract in January 2020 to build a bridge at a fixed price of $14 million. The bridge was to be completed by October 2022 Total cumulative costs incurred by the end of December 2020 and 2021 were $2 million and $6 million, respectively. Sunshine is unable to estimate the total costs of the project prior to completion. Final costs at the end of the project totaled $11 million. How much cost of sales will Sunshine report in 2022?
A)$3,000,000
B)$5,000,000
C)$8,000,000
D)$11,000,000

Question

Quizplus · Accepted Answer

Cost of sales is calculated as the total cost incurred during the project minus the cost incurred until the end of the previous year. Therefore, cost of sales for 2022 can be calculated as:

Cost of sales = Total project cost - Cost incurred until Dec 2021 
Cost of sales = $11 million - $6 million 
Cost of sales = $5 million

Therefore, the correct answer is option B.

Sunshine Contractors Started a Contract in January 2020 to Build