Question:
Hansen Construction Inc. has consistently used the percentage-of-completion method of recognizing
income.
During 2013, Hansen started work on a $3,000,000 fixed-price construction contract. The accounting
records disclosed the following data for the year ended December 31, 2013:
Costs incurred $ 930,000
Estimated cost to complete 2,170,000
Progress billings 1,100,000
Collections 700,000
How much loss should Hansen have recognized in 2013?
a. $180,000
b. $230,000
c. $30,000
d. $100,000
Beginning in 2011, International Financial Reporting Standards are tested on the CPA exam along with
U.S. GAAP. The following questions deal with the application of IFRS.
Answer:
d. Since the total cost of the contract, $3,100,000 ($930,000 + 2,170,000), is projected to exceed the
contract price of $3,000,000, the excess cost of $100,000 must be recognized as a loss in 2013.
Hansen Construction Inc. has consistently used the percentage-of-completion method of recognizing
income.
During 2013, Hansen started work on a $3,000,000 fixed-price construction contract. The accounting
records disclosed the following data for the year ended December 31, 2013:
Costs incurred $ 930,000
Estimated cost to complete 2,170,000
Progress billings 1,100,000
Collections 700,000
How much loss should Hansen have recognized in 2013?
a. $180,000
b. $230,000
c. $30,000
d. $100,000
Beginning in 2011, International Financial Reporting Standards are tested on the CPA exam along with
U.S. GAAP. The following questions deal with the application of IFRS.
Answer:
d. Since the total cost of the contract, $3,100,000 ($930,000 + 2,170,000), is projected to exceed the
contract price of $3,000,000, the excess cost of $100,000 must be recognized as a loss in 2013.
