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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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On April 1, 2019, Pine Construction Company entered into a fixed-price contract to construct an apartment building for $6,000,000. Pine will satisfy the performance obligations in the contract over time and appropriately accounts for this contract. Information relating to the contract is as follows:

Chapter 17, Problem 9MC, On April 1, 2019, Pine Construction Company entered into a fixed-price contract to construct an

What is the amount of contract costs incurred during the year ended December 31, 2020?

  1. a. $1,200,000
  2. b. $1,920,000
  3. c. $1,980,000
  4. d. $2,880,000

To determine

Compute the amount contract costs incurred during the year ended December 31, 2020.

Explanation

Contract: Contract is an agreement among two parties or more parties which includes enforceable obligations and rights. A contract can be “written oral or implied” by ordinary business practices.

Compute the amount of contract costs:

Particulars20192020
Percent completed 20%40%
Estimated costs to complete $4,500,000 $4,800,000
Gross profit recognized$300,000 $720,000
Revenue to date (Percent

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