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joecjr
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Posted: 21 Nov 2009 at 20:46 | IP Logged  

Can anyone help with this?

drawing a huge blank.

thank you.

 

On April 1, 2007, Pine Construction Company entered into a fixed-price contract to construct an apartment building for $6,000,000.  Pine appropriately accounts for this contract under the percentage-of-completion method.  Information relating to the contract is as follows:

 

 

At December 31, 2007

At December 31, 2008

Percentage of completion

20%

60%

Estimated costs at completion

$4,500,000

$4,800,000

Income recognized (cumulative)

$   300,000

$   720,000

 

What is the amount of contract costs incurred during the year ended December 31, 2008?

 

< id=Answer = value=16319 name=Answer>A. $1,200,000
< id=Answer = value=16320 name=Answer>B. $1,920,000
< id=Answer = value=16321 name=Answer>C. $1,980,000
< id=Answer = value=16322 name=Answer>D. $2,880,000



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FAR [83] 1109 Yaeger
AUD [90] 0510 Roger CPA
BEC [76] 0810 Yaeger/Gleim
REG [80] 1110 Yaeger
Done 12/16/2010
1year & 4months

Philadelphia, PA
joey_cjr@yahoo.com
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Future CPA
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Posted: 21 Nov 2009 at 21:09 | IP Logged  

Can you please confirm if the correct answer is choice C?

The calculation is as follows:

2007:
20% is completed and the estimated total cost at completion is: 4,500,000.
20%*4,500,000 = 900,000 costs incurred in 2007

2008:
60% is completed and the estimated total cost at completion is: 4,800,000.

60%*4,800,000 = 2,880,000 of total costs incurred so far.
But you already recorded 900,000 in the previous year.
2,880,000 - 900,000 = 1,980,000 costs incurred in 2008







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B:85
A:90
R:92
F:90
My inspiration: "O mankind! We have created you male & female, & have made you nations & tribes that ye may know one another. The noblest of you is the best in conduct."-Quran
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yahoofan
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Posted: 21 Nov 2009 at 21:09 | IP Logged  

Actual cost incurred up to Dec 31,2007:

4,500,000*20% = 900,000

Actual cost incurred up to Dec 31,2008:
4,800,000*60%= 2,880,000

Actual cost incurred in year of 2008 =
2,880,000 - 900,000 = 1,980,000

So the answer is C.


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joecjr
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Posted: 21 Nov 2009 at 21:31 | IP Logged  

yes c is the correct answer.

thank you for the help.



__________________
FAR [83] 1109 Yaeger
AUD [90] 0510 Roger CPA
BEC [76] 0810 Yaeger/Gleim
REG [80] 1110 Yaeger
Done 12/16/2010
1year & 4months

Philadelphia, PA
joey_cjr@yahoo.com
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