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Total Cost $15,000,000
Total Cost $15,000,000
BSA-3B
StrongBridges Ltd. was awarded a $20 million contract to build a bridge. The estimated time to complete the projec
years, with an estimated cost of $15 million. Assuming that the cost estimates do not change, the project is expecte
$5 million in profit. The following is a schedule on the project:
Notes:
Costs Incurred is the costs incurred to build the bridge as estimated by the company’s engineer.
Billings are the amount of money StrongBridges Ltd. billed for the construction of the bridge.
Billings amount is set by the contract.
Cash Collected is the amount of money StrongBridges Ltd. received for the construction of the
bridge. The variation in billings and cash collected is due to timing differences.
% Completed is determined by the percentage completion formula.
For the schedule above, revenues recognized under the percentage of completion method:
Year 2018: 33% completed. Revenue recognized = 33% x $20 million (contract price) = $6,600,000
Year 2019: 47% completed. Revenue recognized = 47% x $20 million (contract price) – $6.6 million (previously recognized) =
Year 2020: 100% completed. Revenue recognized = 100% x $20 million (contract price) – $6.6 million – $2.8 million (previousl
Total Revenue = $20,000,000