Reference no: EM132566425
On July 1, 2019, Paver Construction Company signed a contract with the State of Missouri to build a new highway from St. Louis to Cape Girardeau. The terms of the contract were that Paver Construction Companywould be paid a total of $ 280,000,000 for the project, with $ 140,000,000 being paid on July 1, 2019, another $ 70,000,000 on January 1, 2020, and the remaining $ 70,000,000 upon completion of the project. Theestimated completion date of the project is November 30, 2020, and the final payment iS reduced by $ 2,000,000 for each month, or fraction thereof, in which completion of the highway is delayed.
- Paver Construction Company estimates that it will cost them $ 200,000,000 to complete the project. Since sections of the highway are opened to raffic once they are completed, Paver has decided to recognizerevenue "over time", and will use "Costs Incurred to Date"/"Estimated Total Costs" as their measure of completion.
- As of December 31, 2019, "Costs Incurred to Date" were $ 80,000,000, and at that point in time, Paver expected to complete the highway on schedule. The highway was actually completed on December 14, 2020with a total cost of $ 205,000,000. Since the project was slightly delayed, Paver received a final payment of $ 68,000,000 on December 14, 2020 (all previous payments were made as scheduled). Paver Construction Company's fiscal year ends on December 31.
Question 1: In accordance with US GAAP, how much revenue should Paver Construction Company report related to the Missouri Highway Project for their fiscal year ending December 31, 2020?
Option A. $ 125,000,000
Option B. $ 138,000,000
Option C. $ 140,000,000
Option D. $ 166,000,000
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