Financial Reporting and Analysis Q70
70A company entered into a three-year construction project with a total contract price of $11.2 million and an expected total cost of $8.7 million.The following table provides cash flow information relating to the contract:
| All figures in millions | Year 1 | Year 2 | Year 3 |
| Costs incurred and paid | $2.2 | $3.5 | $3 |
| Amounts billed and payments received | $3.5 | $4.1 | $3.6 |
If the company uses the percentage-of-completion method, the amount of revenue recognized (in millions) in Year 2 is closest to:
- Option : A
- Explanation : The revenue reported is equal to the percentage of the contract that is completed in that period, where percentage completion is based on costs. In Year 2: (3.5 / 8.7) * 11.2 = 4.5.
