Reference no: EM132779888

In 20x1, Gorgeous Too Co. enters into a fixed-price construction contract with a customer. At contract inception, Gorgeous Too Co. assesses its performance obligations in the contract and concludes that it has a single performance obligation that is satisfied over time. Gorgeous Too Co. determines that the measure of progress that best depicts its performance on the contract is input method based on costs incurred.

Information on the contract follows:

Cumulative contract costs incurred 20x1 -2,250,000 20x2 - 4,800,000
Cumulative profits recognized 20x1 - 750,000 20x2 - 1,200,000
Progress billings 20x1 - 2,400,000 20x2 - 3,600,000
Collections on progress billings 20x1 - 2,000,000 20x2 - 4,000,000

Problem 1: The contract is completed in 20x2. How much is the transaction price in the contract?

a. 9,000,000
b. 7,000,000
c. 5,000,000
d. 6,000,000