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Conrad Construction Corp. has a $20 million contract to construct a building. The company estimates gross profit of $4 million. During the current year, the company incurred $2 million of costs on the contract. Under the percentage-of-completion method, how much will Conrad Construction Corp. report as revenue in the current year?

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jepessoa

Answer:

$2.5 million

Explanation:

Conrad construction estimated its total costs at $16 million and a gross profit of $4 million (25% of costs incurred).

If the company incurred in $2 million costs during this year, it can estimate its gross profit at $500,000.

So the total revenue that it should report for the year is $2.5 million (= $2 million + $0.5 million)

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