{"id":216231,"date":"2025-05-19T02:31:43","date_gmt":"2025-05-19T02:31:43","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=216231"},"modified":"2025-05-19T02:31:45","modified_gmt":"2025-05-19T02:31:45","slug":"indiana-company-began-a-construction-project-in-2024-with-a-contract-price-of-162-million-to-be-received-when-the-project-is-completed-in-2026","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/05\/19\/indiana-company-began-a-construction-project-in-2024-with-a-contract-price-of-162-million-to-be-received-when-the-project-is-completed-in-2026\/","title":{"rendered":"Indiana Company began a construction project in 2024 with a contract price of $162 million to be received when the project is completed in 2026"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">Indiana Company began a construction project in 2024 with a contract price of $162 million to be received when the project is completed in 2026. During 2024, Indiana incurred $37 million of costs and estimates an additional $81 million of costs to complete the project. Indiana recognizes revenue over time and for this project recognizes revenue over time according to the percentage of the project that has been completed. Indiana: Note: Do not round intermediate calculations. Present final answer in millions, to 2 decimal places. Multiple Choice.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">recognized $537.00 million loss on the project in 2024.<br>recognized no gross profit or loss on the project in 2024.<br>recognized $581.00 million loss on the project in 2024.<br>recognized $13.80 million gross profit on the project in 2024.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-1-color\">The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Correct Answer:<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>recognized \\$13.80 million gross profit on the project in 2024.<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Detailed Explanation:<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Indiana Company is using the <strong>percentage-of-completion method<\/strong> to recognize revenue <strong>over time<\/strong>. This method allows a company to recognize revenue and gross profit proportionally based on how much of the project has been completed during the accounting period.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Step 1: Calculate Total Estimated Cost of the Project<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">We are given:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Costs incurred to date (2024): <strong>\\$37 million<\/strong><\/li>\n\n\n\n<li>Estimated costs to complete: <strong>\\$81 million<\/strong><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">So, the <strong>total estimated cost<\/strong> of the project =<br>\ud83d\udc49 <strong>\\$37 million + \\$81 million = \\$118 million<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Step 2: Compute Percentage of Completion<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Percentage of completion =<br>\ud83d\udc49 <strong>Costs incurred to date \/ Total estimated cost<\/strong><br>= <strong>\\$37 million \/ \\$118 million \u2248 0.3136 or 31.36%<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Step 3: Recognize Revenue for 2024<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Total contract revenue = <strong>\\$162 million<\/strong><br>Revenue recognized in 2024 =<br>\ud83d\udc49 <strong>\\$162 million \u00d7 31.36% \u2248 \\$50.80 million<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Step 4: Recognize Gross Profit<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Gross profit =<br>\ud83d\udc49 <strong>Revenue recognized \u2013 Costs incurred to date<\/strong><br>= <strong>\\$50.80 million \u2013 \\$37 million = \\$13.80 million<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Conclusion:<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Indiana recognized <strong>\\$13.80 million in gross profit<\/strong> in 2024 based on the percentage of project completed.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The percentage-of-completion method ensures that financial reporting reflects the actual progress of long-term projects. Since the project is expected to be completed profitably (total revenue \\$162 million exceeds total estimated cost \\$118 million), <strong>no loss is recognized<\/strong>. Instead, revenue and gross profit are recognized proportionally.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This also rules out the other answer choices:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>\\$537.00 million and \\$581.00 million losses<\/strong> are incorrect and excessive.<\/li>\n\n\n\n<li>Recognizing <strong>no profit or loss<\/strong> would be incorrect because the company has completed over 31% of the project and incurred costs, so it must report part of the revenue and profit.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">\u2705 <strong>Final recognized gross profit: \\$13.80 million<\/strong> in 2024.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Indiana Company began a construction project in 2024 with a contract price of $162 million to be received when the project is completed in 2026. During 2024, Indiana incurred $37 million of costs and estimates an additional $81 million of costs to complete the project. Indiana recognizes revenue over time and for this project recognizes [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-216231","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/216231","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=216231"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/216231\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=216231"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=216231"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=216231"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}