Business FinancesQuestion 502 of 690
A contract has a total contract price of $500,000 and an estimated total cost of $400,000. To date, the contractor has incurred $300,000 in actual cost and billed the owner $360,000. Using the cost-to-cost percentage-of-completion method, what is the percent complete and the revenue earned to date?
a.60% complete; $300,000 earned
b.72% complete; $360,000 earned
c.75% complete; $375,000 earned
d.80% complete; $400,000 earned
Explanation
Percent Complete = Cost Incurred ÷ Estimated Total Cost = $300,000 ÷ $400,000 = 75%. Revenue Earned = 75% × $500,000 contract price = $375,000. Because billings ($360,000) are less than earned revenue ($375,000), the contract is under-billed by $15,000.
Practice all 690 questions free — no signup required.
Related questions on this topic
- A contractor has annual credit sales of $1,825,000 and an average accounts receivable balance of $250,000. What is the Days Sales Outstanding (DSO)?
- A contractor's annual cost of goods sold is $1,460,000, average accounts payable is $200,000, and average inventory turns are 36 days. What is the Days Payable Outstanding (DPO)?
- A contractor has DSO of 55 days, days inventory outstanding (DIO) of 30 days, and DPO of 40 days. What is the cash conversion (working-capital) cycle?
- A contractor has earned $400,000 in revenue under percentage-of-completion accounting, but has billed the customer $450,000 to date. How is this $50,000 difference reported on the balance sheet?
- Under current IRS rules, which form must a contractor file to report $1,500 paid to an unincorporated independent subcontractor for services performed during the tax year?
- Under IRS rules, when does a contractor's payroll tax liability require deposits by electronic funds transfer (EFTPS) rather than by check?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against California CSLB Contractor License Law & Business Exam · How we review