Indiana Co. began a construction project in 2018 with a contract price of $164 million to be received when the project is completed in 2020. During 2018, Indiana incurred $38 million of costs and estimates an additional $90 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. In 2019, Indiana incurred additional costs of $53 million and estimated an additional $37 million in costs to complete the project. Indiana (Do not round your percentage calculated) :

Question

Business

Ramiro Blanchard

15 March, 08:53

Indiana Co. began a construction project in 2018 with a contract price of $164 million to be received when the project is completed in 2020. During 2018, Indiana incurred $38 million of costs and estimates an additional $90 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. In 2019, Indiana incurred additional costs of $53 million and estimated an additional $37 million in costs to complete the project. Indiana (Do not round your percentage calculated) :

+1

Answers (1)

Know the Answer?

West · Answer 1

2018 revenue 48,687,500

operating income 10,687,500

2019 revenue 67.906.250

operating income 14.906.250‬

Explanation:

To recognize revenue we do a weight between the incurred cost and thetotal cost of the construction+

Then we subtract the incurred cost to the revenue to get the operating income.

2018:

incurred cost 38M

expected to complete 90M

total cost: 38M + 90M = 128M

percentage of completion: 38 / 128 = 0,296875‬

164,000,000 x 0.296875 = 48.687.500‬

2019:

incurred cost 53M

cost to complete: 37M

total cost 90M

percentage of completion: 53/90 = 0.588889

we recognize 58.59 of the remaining revenue

164,000,000 - 48,687,500 = 115.312.500‬

115.312.500‬ x 0.588889 = 67.906.250