Assume That Funtime Corp -
If Funtime Uses the Percentage of Completion to Playground

question 75

Multiple Choice

Assume that Funtime Corp. has agreed to construct a new playground for Durrey County for $2,300,000. Construction of the new playground will begin on March 17, 2012 and is expected to be completed in August 2013. At the signing of the contract Funtime Corp. estimates that the it will cost $1,600,000 to build the playground.
At the end of 2012 Funtime provided the following information about the project:
$\begin{array}{llcc}& \text {Costsincurred } & \text {Estimated costs } \\\underline{ \text { Year} }& \underline{\text {to date } } & \underline{\text { remaining} }\\2012&\$1,000,000&\$800,000\\\end{array}$
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If Funtime uses the percentage of completion to recognize revenue on the long-term contract how much gross margin should Funtime recognize in 2012?

• A) $389,200
• B) $278,000
• C) $556,000
• D) $0

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