Seasons Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1,550,000 each quarter. The total contract price is $18,600,000 and Seasons estimates total costs of $17,750,000. Seasons estimates that the building will take 3 years to complete and commences construction on January 2, 2024. At December 31, 2024, Seasons estimates that it is 30% complete with the construction, based on costs incurred. By December 31, 2025, Seasons estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $18,000,000 due to unanticipated price increases. What is the total amount of Construction Expenses that Seasons will recognize for the year ended December 31, 2025? O $13,500,000 $7,875,000 $7,987,500 $8,175,000

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Seasons Construction is constructing an office building under contract for
Cannon Company and uses the percentage-of-completion method. The
contract calls for progress billings and payments of $1,550,000 each quarter.
The total contract price is $18,600,000 and Seasons estimates total costs of
$17,750,000. Seasons estimates that the building will take 3 years to
complete and commences construction on January 2, 2024. At December 31,
2024, Seasons estimates that it is 30% complete with the construction, based
on costs incurred.
By December 31, 2025, Seasons estimates that it is 75% complete with the
building; however, the estimate of total costs to be incurred has risen to
$18,000,000 due to unanticipated price increases. What is the total amount
of Construction Expenses that Seasons will recognize for the year ended
December 31, 2025?
$13,500,000
O $7,875,000
$7,987,500
O $8,175,000
Transcribed Image Text:Seasons Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1,550,000 each quarter. The total contract price is $18,600,000 and Seasons estimates total costs of $17,750,000. Seasons estimates that the building will take 3 years to complete and commences construction on January 2, 2024. At December 31, 2024, Seasons estimates that it is 30% complete with the construction, based on costs incurred. By December 31, 2025, Seasons estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $18,000,000 due to unanticipated price increases. What is the total amount of Construction Expenses that Seasons will recognize for the year ended December 31, 2025? $13,500,000 O $7,875,000 $7,987,500 O $8,175,000
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