Florida Business and Finance Percentage of Completion Method for Contracts

Question 1

1. Your cost to date on a job are $25,000. There is an estimated cost remaining of $45,000. The
   contract price is $100,000. To date, you have been paid $40,000. What percentage of the work is completed at
   this time?

A. 33.25%
B. 35.714%
C. 48.333%
D. 66.667%

Answer 1

1. B
   (Completed cost to date + estimated remaining cost = estimated total cost)
   $25,000+$45,000 = $70,000
   (Completed to date ÷ estimated total cost = percentage of work completed)
   $25,000 ÷ $70,000 = 35.714%
   35.714% is the percentage of work completed

Question 2

2. In the above question, at this time, how much of the contract income is earned/recognized?

A. $31,988
B. $35,714
C. $39,267
D. $43,000

Answer 2

2. B
   (Completed cost to date + estimated remaining cost = estimated total cost)
   $25,000+$45,000 = $70,000
   (Completed to date ÷ estimated total cost = percentage of work completed)
   $25,000 ÷ $70,000 = 35.714%
   35.714% is the percentage of work completed.
   (Percentage of work completed applied to contract price = amount of contract income earned or
   recognized)
   35.714% of $100,000 is $35,714

Question 3

3. In the above question, what percentage of the work remains (not completed)?

A. 47.380%
B. 53.082%
C. 64.286%
D. 74.395%

Answer 3

3. C
   (Completed cost to date + estimated remaining cost = estimated total cost)
   $25,000+$45,000 = $70,000
   (Remaining cost ÷ estimated total cost = percentage of work not completed)
   $45,000 ÷ $70,000 = 64.286%
   64.286% is the percentage of work not completed

Question 4

4. A job’s cost is $3,000 to date. It’s estimated another $9,000 in costs remain. The contract
   price of the job is $15,000? What percentage of the job is complete?

A. 15%
B. 20%
C. 25%
D. 33%

Answer 4

4. C
   (Completed to date + estimated cost remaining = total cost)
   3,000 + 9,000 = 12,000
   (Completed to date ÷ total cost = % completed)
   3,000 ÷ 12,000 = .25 or 25%

Question 5

5. In the above question, how much money has been earned?

A. $3,750
B. $4,000
C. $4,500
D. $4,950

Answer 5

5. A
   (Percentage of actual cost completed x total contract = Money earned)
   25% x 15,000 = 3,750
   This is actual amount earned to date.

Question 6

6. During a job, your cost to date is $900. You estimate that the cost to complete the work is
   another $1,350. The contract price on the job is $2,700. You have received $500 to date. Which of the
   following is true?

A. You have completed more than half of the job
B. You have already received more than you have earned
C. You have earned over $1,000
D. You have earned under $1,000

Answer 6

6. C
   (Completed to date + estimated remaining cost = total cost)
   900 + 1,350 = 2,250
   (Completed to date ÷ total cost = % completed) 900 ÷ 2,250 = .4 or 40%
   (Percentage of actual cost completed x total contract = $ earned) 40% x 2,700 = 1,1
   This is actual amount earned to date.

Question 7

7. In the above question, what percentage of the job contract total has been earned?

A. 33%
B. 40%
C. 44%
D. 49%

Answer 7

7. B
   (Completed to date + estimated remaining cost = total cost)
   900 + 1,350 = 2,250
   (Completed to date ÷ total cost = % completed) 900 ÷ 2,250 = .4 or 40%
   (Percentage of actual cost completed x total contract = $ earned) 40% x 2,700 = 1,1
   This is actual amount earned to date.

Question 8

8. You have a job with current costs of $250,000. You estimate $125,000 in job costs remain. The
   contract price is $450,000. You have received payments totaling $290,000. You have earned __________ % of the job.

A. 33.333%
B. 52.67%
C. 66.667%
D. 71.5%

Answer 8

8. C
   (Completed to date + estimated cost remaining = total cost)
   250,000 + 125,000 = 375,000
   (Completed to date ÷ total cost = % completed)
   250,000 ÷ 375,000 = .6667%

Question 9

9. In the above question, the unearned percentage of the job is ?

A. 33.333%
B. 40.00%
C. 66.667%
D. 100%

Answer 9

9. A
   (Completed to date + estimated cost remaining = total cost)
   250,000 + 125,000 = 375,000
   (Estimated cost remaining ÷ total cost = % not completed or unearned)
   125,000 ÷ 375,000 = .333%

Question 10

10. In question 8, above, which of the following is true?

A. You have earned more than you have been paid
B. You have earned exactly what you have been paid
C. You have earned less than you have been paid
D. You have earned nothing

Answer 10

10. A
    (Completed to date + estimated cost remaining = total cost)
    250,000 + 125,000 = 375,000
    (Completed to date ÷ total cost = % completed) 250,000 ÷ 375,000 = or 66.67%
    (Percentage of actual cost completed x total contract = earned) 66.67% x 450,000 = $300,015
    This is actual amount earned to date. You have been paid $290,000, so you’ve earned more than
    you’ve been paid (amount paid minus amount earned: negative in this case)

Question 11

11. In percentage-of-completion method accounting, which of the following is true?
    A. Monies paid more than the amount earned are deferred income
    B. Monies paid more than the amount earned are deferred income but will be treated as a liability
    on the general ledger, even though it’s really an asset
    C. Monies paid more than the amount earned is unearned income
    D. All the above are true

Answer 11

11. D See Builder’s Guide to Accounting Pgs. 24 – 32

Question 12

12. What is a term for money that is withheld, even though it’s been earned?

A. Lay away
B. Industry standard
C. Retainage
D. Retainer

Answer 12

12. C See Builder’s Guide to Accounting Pg. 24