In 20x1, ABC Co. was contracted to build a railroad. The contractprice is equal to the total contract costs plus 25% thereof. However,if the project is completed within 4 years, ABC will receive anadditional payment of 200,000. Information on the project isshown below:Costs incurred to dateEstimated costs to complete20x12,400,0003,600,00020x220x34,575,000 6,125,0001,525,000 125,000In 20x1 and 20x2, it was not highly profDIF25,000that the project will becompleted on time. However, in 20x3, ABC assessed that projectwill be completed earlier than originally expected and thus it is nowhighly probable that the incentive payment will be received.suspension with invalidation of grade, 3rd violation- suspensionHow much profit is recognized on the contract in 20x3?CMP 131

Given that, Contract price = Total cost + 25% Incentive to be paid= P200,000 Total cost incurred…

In 20x1, ABC Co. was contracted to build a railroad. The contract price is equal to the total contract costs plus 25% thereof. However, if the project is completed within 4 years, ABC will receive an additional payment of P200,000. Information on the project is shown below: Costs incurred to date Estimated costs to complete 20x1 20x2 20x3 2,400,000 4,575,000 6,125,000 3,600,000 In 20x1 and 20x2, it was not highly profDIF25,000 125,000 that the project will be completed on time. However, in 20x3, ABC assessed that project will be completed earlier than originally expected and thus it is now highly probable that the incentive payment will be received. suspension with invalidation of grade; 3rd violation- suspension How much profit is recognized on the contract in 20x3? CMP 131

In 20x1, ABC Co. was contracted to build a railroad. The contract price is equal to the total contract costs plus 25% thereof. However, if the project is completed within 4 years, ABC will receive an additional payment of P200,000. Information on the project is shown below: Costs incurred to date Estimated costs to complete 20x1 20x2 20x3 2,400,000 4,575,000 6,125,000 3,600,000 In 20x1 and 20x2, it was not highly profDIF25,000 125,000 that the project will be completed on time. However, in 20x3, ABC assessed that project will be completed earlier than originally expected and thus it is now highly probable that the incentive payment will be received. suspension with invalidation of grade; 3rd violation- suspension How much profit is recognized on the contract in 20x3? CMP 131

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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