Question

On December 31, 2012, Mass Construction Inc. signs a contract with the state of Massachusetts Department of Transportation to manufacture a bridge over the Merrimack. Mass Construction anticipates the construction will take three years. The company's accountants provide the following contract details relating to the project:

Contract price $520 million
Estimated construction costs $300 million
Estimated total profit $220 million
During the three-year construction period, Tri-State incurred costs as follows:
2013 $ 30 million
2014 $180 million
2015 $ 90 million
Tri-State uses the percentage of completion method to recognize revenue. Which of the following represent the revenue recognized in 2013, 2014, and 2015?
A. $52 million, $312 million, $156 million
B. $12 million, $72 million, $36 million
C. $140 million, $140 million, $140 million
D. $30 million, $180 million, $90 million
E. None of the above

Answer 1

Answer: A. $52 million, $312 million, $156 million

Step-by-step explanation:

The percentage of the total cost incurred in a year is the percentage of revenue to recognize in that year.

2013 Revenue;

= (30/ 300) * 520

= $52 million

2014 Revenue;

= (180/300) * 520

= $312 million

2015

= (90/300) * 520

= $156 million