A Sarasota retail build-out has a $480,000 contract. Costs incurred are $160,000, estimated cost to complete is $240,000, and billings to date are $215,000. Under percent-complete reporting, what billing position should be shown?
Correct Answer
B) $23,000 overbilled
Total estimated cost is $400,000, so the job is 40% complete. Earned revenue is $192,000, and billings of $215,000 exceed earned revenue by $23,000.
Why This Is the Correct Answer
Total estimated cost is $400,000, so the job is 40% complete. Earned revenue is $192,000, and billings of $215,000 exceed earned revenue by $23,000.
Why the Other Options Are Wrong
Option A: $17,000 underbilled
$17,000 underbilled is below the supported result for wip schedule over/under billing; it likely uses the wrong base, period, or account bucket.
Option C: $55,000 overbilled
$55,000 overbilled is above the supported result for wip schedule over/under billing; it likely adds an unsupported amount or compares the wrong financial base.
Option D: $80,000 underbilled
$80,000 underbilled is above the supported result for wip schedule over/under billing; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Reviewing Month-End money test: bucket before math for wip schedule over under.
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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