Given the following data, what is the balance in construction-in-process at the end of 2006 under the percentage of completion method for a project begun in 2006 with a contract price of $1,100?$\begin{array}{|l|l|l|}
\hline & 2006 & 2007 \
\hline \text { Costs incurred this year } & \$ 100 & \$ 200 \
\hline \text { Total estimated costs remaining at end of year } & 700 & 400 \
\hline
\end{array}$
A) $100
B) $38
C) $138
D) $400

Question

Quizplus · Accepted Answer

The percentage of completion method recognizes revenue and costs based on the progress of the construction project. To find the balance in construction-in-process at the end of 2006, we first calculate the percentage of completion for 2006. The total estimated costs at the end of 2006 are $800 ($100 incurred + $700 remaining). The percentage of completion is $100 / $800 = 12.5%. The revenue recognized in 2006 is 12.5% of the total contract price of $1,100, which is $137.5. The balance in construction-in-process is the costs incurred up to the end of 2006 ($100) plus the gross profit recognized ($37.5, rounded from $137.5 - $100), totaling $137.5, rounded to $138.

Given the Following Data, What Is the Balance in Construction-In-Process