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hamilton construction company uses the percentage of completion method of accounting. in 2020. hamilton began work under

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anthougo

Question Completion:

Hamilton construction company uses the percentage of completion method of accounting.  In 2020, Hamilton began work on the construction of a hospital, which provides for a contract price of $2,195,000.  Other details follow: 202O 2021 Costs incurred during the year 637,600 1,000,000 Total estimated cost 1,594,000 1,637,600 Billings during the year 427,000 2,195,000 Collections during the year 343,000 1,509,000 What portion of the total contract price would be recognized as revenue in 2020?

Answer options: 2,195,000 878,000 1,097,500 427,000 343,000

Answer:

Hamilton Construction Company

The portion of the total contract price would be recognized as revenue in 2020 is:

= $878,000.

Explanation:

a) Data and Calculations:

Contract price = $2,195,000.

                                                          2020           2021

Costs incurred during the year $637,600  $1,000,000

Total estimated cost                  1,594,000     1,637,600

Billings during the year                427,000    2,195,000

Collections during the year         343,000    1,509,000

Percentage of completion= Cost incurred in 2020/Total estimated cost in 2020 * 100

= $637,600/$1,594,000  * 100

= 40%

Revenue to be recognized in 2020  = 40% * Contract Price

= $878,000 ($2,195,000 * 40%)

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