[Kaymans]

Ok I am going through passmaster question and the solutions seem contradictory between different questions. What is total estimated costs?!? Why does it sometimes include the costs incurred in year one and sometimes it doesn’t!

One example includes

1. Costs incurred to date

2. Estimated costs to complete

Second example includes

1. total estimated costs to complete

(2,000,000 costs in year 1 are not included in the total)

here’s wording for second example

“Mill Construction Co. uses the percentage-of- completion method of accounting. During Year 1, Mill contracted to build an

apartment complex for Drew for $20,000,000. Mill estimated that total costs would amount to $16,000,000 over the period of construction. In connection with this contract, Mill incurred $2,000,000 of construction costs during Year 1. Mill billed and collected $3,000,000 from Drew in Year 1. What amount should Mill recognize as gross profit for Year 1?”

Audit: 91
FAR: 87
REG: 87
BEC: 86

7 months, full-time employee, self-study with Becker (All), CPA excel (REG), Wiley textbook (FAR) and testbank (All)

[Kaymans]

wording for question one

“Gow Constructors, Inc. has consistently used the percentage-of-completion method of recognizing income. In Year 1, Gow started work on an $18,000,000 construction contract that was completed in Year 2. The following information was taken from Gow's Year 1 accounting records:

Progress billings 6,600,000

Costs incurred 5,400,000

Collections 4,200,000

Estimated costs to complete 10,800,000

Audit: 91
FAR: 87
REG: 87
BEC: 86

7 months, full-time employee, self-study with Becker (All), CPA excel (REG), Wiley textbook (FAR) and testbank (All)

[Kaymans]

wording for question one

“Gow Constructors, Inc. has consistently used the percentage-of-completion method of recognizing income. In Year 1, Gow started work on an $18,000,000 construction contract that was completed in Year 2. The following information was taken from Gow's Year 1 accounting records:

Progress billings 6,600,000

Costs incurred 5,400,000

Collections 4,200,000

Estimated costs to complete 10,800,000

Audit: 91
FAR: 87
REG: 87
BEC: 86

7 months, full-time employee, self-study with Becker (All), CPA excel (REG), Wiley textbook (FAR) and testbank (All)

[NYCaccountant]

Is the first answer $500,000?

and the second one $600,000?

The questions look incomplete though…..

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[NYCaccountant]

Is the first answer $500,000?

and the second one $600,000?

The questions look incomplete though…..

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[Kaymans]

yes those are the answers, but I am wondering why there are two components of total estimated costs in the first example, but in the second example, costs incurred during the year is not included as part of total estimated costs

Audit: 91
FAR: 87
REG: 87
BEC: 86

7 months, full-time employee, self-study with Becker (All), CPA excel (REG), Wiley textbook (FAR) and testbank (All)

[Kaymans]

yes those are the answers, but I am wondering why there are two components of total estimated costs in the first example, but in the second example, costs incurred during the year is not included as part of total estimated costs

Audit: 91
FAR: 87
REG: 87
BEC: 86

7 months, full-time employee, self-study with Becker (All), CPA excel (REG), Wiley textbook (FAR) and testbank (All)

[highlightnumb]

If at inception the problem tells you that the Total estimate to complete the project is 2,250,000 but later on you see that the cost incurred to date are 1,800,000 and the estimate to complete (basically a new estimate) is 600,000 then the new total estimate to complete the project is now 2,400,000 which is higher and more accurate than the original 2,250,000 estimate. You must use the 2.4 to work the percentage of completion method question. Some questions will give you 2 estimates, some won't. Just remember, estimates can change during progression. Hope this helps.

FAR. Feb 2014 76
REG. Jan 2015 79 half way there!!
BEC. Feb 2015 79 thank you God!!
AUD. Apr 20, 2015 and will be done. Hold that thought 65, 7/14/15 85!
Ok where was I? Oh thats right now I'm Done!!!!!!!!!
Ethics 92!!

"You down wit SEC?, yeah you know me!!!"

Cali Candidate

All Becker Materials, Wiley Test Bank, Ninja audio, Ninja MCQ, Ninja Notes

[highlightnumb]

If at inception the problem tells you that the Total estimate to complete the project is 2,250,000 but later on you see that the cost incurred to date are 1,800,000 and the estimate to complete (basically a new estimate) is 600,000 then the new total estimate to complete the project is now 2,400,000 which is higher and more accurate than the original 2,250,000 estimate. You must use the 2.4 to work the percentage of completion method question. Some questions will give you 2 estimates, some won't. Just remember, estimates can change during progression. Hope this helps.

FAR. Feb 2014 76
REG. Jan 2015 79 half way there!!
BEC. Feb 2015 79 thank you God!!
AUD. Apr 20, 2015 and will be done. Hold that thought 65, 7/14/15 85!
Ok where was I? Oh thats right now I'm Done!!!!!!!!!
Ethics 92!!

"You down wit SEC?, yeah you know me!!!"

Cali Candidate

All Becker Materials, Wiley Test Bank, Ninja audio, Ninja MCQ, Ninja Notes

[highlightnumb]

Sorry Kaymans my numbers are from a different question but it still involves what you're asking.

FAR. Feb 2014 76
REG. Jan 2015 79 half way there!!
BEC. Feb 2015 79 thank you God!!
AUD. Apr 20, 2015 and will be done. Hold that thought 65, 7/14/15 85!
Ok where was I? Oh thats right now I'm Done!!!!!!!!!
Ethics 92!!

"You down wit SEC?, yeah you know me!!!"

Cali Candidate

All Becker Materials, Wiley Test Bank, Ninja audio, Ninja MCQ, Ninja Notes

[highlightnumb]

Sorry Kaymans my numbers are from a different question but it still involves what you're asking.

FAR. Feb 2014 76
REG. Jan 2015 79 half way there!!
BEC. Feb 2015 79 thank you God!!
AUD. Apr 20, 2015 and will be done. Hold that thought 65, 7/14/15 85!
Ok where was I? Oh thats right now I'm Done!!!!!!!!!
Ethics 92!!

"You down wit SEC?, yeah you know me!!!"

Cali Candidate

All Becker Materials, Wiley Test Bank, Ninja audio, Ninja MCQ, Ninja Notes

[mjp44]

@highlight…do you use the new estimate of 2.4 to calcuate the GP recognized for year 1 as well? Say for instance the estimate changed in year 2.

FAR- PASSED (11/13)
REG- PASSED (2/14)
BEC- PASSED (5/14)
AUD- PASSED (8/14)

If it's important to you, you will find a way. If it isn't, you will find an excuse.

[mjp44]

@highlight…do you use the new estimate of 2.4 to calcuate the GP recognized for year 1 as well? Say for instance the estimate changed in year 2.

FAR- PASSED (11/13)
REG- PASSED (2/14)
BEC- PASSED (5/14)
AUD- PASSED (8/14)

If it's important to you, you will find a way. If it isn't, you will find an excuse.

[highlightnumb]

mjp44. It looks like you would use the GP% based on the combination of Cost incurred in year 1 and total estimated cost in year 1. The 2.4 is for year 2 GP%. This question below is asking for year 2 GP showing the estimate changing in year 2 for 2.4. 1,800,000 (cost incurred) 600,000 (estimated cost to complete at 12/31/year 2)

Haft Construction Co. has consistently used the percentage of completion method. On January 10, year 1, Haft began work on a 3,000,000 construction contract. At the inception date, the estimated cost of construction was 2,250,000. The following data relate to the progress of the contract:

Income recognized at 12/31/year 1 300,000

Costs incurred 1/10/year 1 through 12/31/ year 2 1,800,000

Estimated cost to complete at 12/31/year 2 600,000

FAR. Feb 2014 76
REG. Jan 2015 79 half way there!!
BEC. Feb 2015 79 thank you God!!
AUD. Apr 20, 2015 and will be done. Hold that thought 65, 7/14/15 85!
Ok where was I? Oh thats right now I'm Done!!!!!!!!!
Ethics 92!!

"You down wit SEC?, yeah you know me!!!"

Cali Candidate

All Becker Materials, Wiley Test Bank, Ninja audio, Ninja MCQ, Ninja Notes

[highlightnumb]

mjp44. It looks like you would use the GP% based on the combination of Cost incurred in year 1 and total estimated cost in year 1. The 2.4 is for year 2 GP%. This question below is asking for year 2 GP showing the estimate changing in year 2 for 2.4. 1,800,000 (cost incurred) 600,000 (estimated cost to complete at 12/31/year 2)

Haft Construction Co. has consistently used the percentage of completion method. On January 10, year 1, Haft began work on a 3,000,000 construction contract. At the inception date, the estimated cost of construction was 2,250,000. The following data relate to the progress of the contract:

Income recognized at 12/31/year 1 300,000

Costs incurred 1/10/year 1 through 12/31/ year 2 1,800,000

Estimated cost to complete at 12/31/year 2 600,000

FAR. Feb 2014 76
REG. Jan 2015 79 half way there!!
BEC. Feb 2015 79 thank you God!!
AUD. Apr 20, 2015 and will be done. Hold that thought 65, 7/14/15 85!
Ok where was I? Oh thats right now I'm Done!!!!!!!!!
Ethics 92!!

"You down wit SEC?, yeah you know me!!!"

Cali Candidate

All Becker Materials, Wiley Test Bank, Ninja audio, Ninja MCQ, Ninja Notes

[Author]

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