Belgium Co

question 108

Multiple Choice

Belgium Co. is constructing a tunnel for $600 million. Construction began in 2013 and is estimated to be completed in 2018. At December 31, 2015, Belgium has incurred costs totaling $267 million with $64 million of that incurred in 2015, $107 million in 2014, and the remainder during 2013. Belgium believes that it completed 30% of the tunnel during 2015, although that may change based on future activity. Belgium Co. uses IFRS for its accounting and regards its cost numbers as very uncertain. What amount of revenue should Belgium Co. recognize for the year ended December 31, 2016?

• A) No revenue should be recognized until the contract is completed in 2018.
• B) $267 million
• C) $180 million
• D) $64 million

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Definitions:

FIFO Method

A method in accounting for managing inventories and financial matters where the first items placed in inventory are the first ones to be used or sold.

Equivalent Units

A concept used in cost accounting to express the amount of work done by an incomplete production process on units of output, converted into an equivalent number of fully completed units.

FIFO Method

"First In, First Out," an inventory valuation method where goods first added to inventory are the first ones to be sold.

Weighted-Average Method

A technique used in various contexts, such as inventory valuation and cost accounting, that calculates an average taking into account the proportionate importance of each component.