Luke's Construction Receives a Contract to Build a Bridge for $6

question 51

Multiple Choice

Luke's Construction receives a contract to build a bridge for $6 000 000, with an estimated cost of $4 000 000. Over the three- year construction period, the costs are estimated to be $500 000 in Year 1, $3 200 000 in Year 2 and $300 000 in Year 3. How much construction revenue would be reported in Year 2 using the percentage of completion method?

• A)$4 800 000
• B)$3 200 000
• C)$2 800 000
• D)$2 300 000

Calculate adjusted cash balances using reconciling items.

Understand the role of internal controls in managing cash.

Distinguish between cash, cash equivalents, and other types of financial instruments.

Understand the implications of NSF checks and bank service charges on cash management.

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Definitions:

Present Value Factors

Multipliers used to calculate the present value of a future amount of money or stream of cash flows given a specific discount rate.

Net Present Value

A financial metric that evaluates the profitability of an investment or project by calculating the present value of expected future cash flows, minus the initial investment cost.

Annuity

A financial instrument that disburses a set series of payments to a person, often employed as a revenue flow for individuals in retirement.

Rate of Return

The increase or decrease in the value of an investment for a given time frame, represented as a proportion of the investment's starting price.