What is the total amount of revenue from long-term contracts

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Pharoah Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1150000 each quarter. The total contract price is $13800000 and Pharoah estimates total costs of $17350000. Pharoah estimates that the building will take 3 years to complete, and commences construction on January 2, 2018.

Problem 1: At December 31, 2019, Pharoah Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $17600000 due to unanticipated price increases. Pharoah Construction completes the remaining 25% of the building construction on December 31, 2020, as scheduled. At that time the total costs of construction are $18350000. What is the total amount of Revenue from Long-Term Contracts and Construction Expenses that Pharoah will recognize for the year ended December 31, 2020?

Revenue             Expenses

A. $13800000     $18350000

B. $3450000         $ 4587500

C. $4587500      $ 4587500

D. $3450000       $ 5150000

 

Reference no: EM132880981

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