A $1,540,000 contract has cost to date of $462,000 and estimated cost to complete of $693,000. Using percent complete, what revenue is earned?
Correct Answer
D) $616,000
Cost to date is 40% of total estimated cost, so earned revenue is 40% of the contract.
Why This Is the Correct Answer
Cost to date is 40% of total estimated cost, so earned revenue is 40% of the contract.
Why the Other Options Are Wrong
Option A: $554,400
$554,400 is below the supported result for percent-complete earned revenue; it likely uses the wrong base, period, or account bucket.
Option B: $577,500
$577,500 is below the supported result for percent-complete earned revenue; it likely uses the wrong base, period, or account bucket.
Option C: $600,600
$600,600 is below the supported result for percent-complete earned revenue; it likely uses the wrong base, period, or account bucket.
Memory Technique
Percent-Complete drawer for Controller Updates: label cost before counting dollars.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section One, Accounting Methods, Percentage-of-Completion Method; Section Three, Recording Before the Event, Percentage of Completion Adjustments; use the job ledger figures in the stem and recompute the same accounting measure.
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