# Embarrassing Question - FSA

I can’t get my head around the percentage of completion method. Can someone help me through the steps? JME Construction always uses the percentage of completion method of recognizing revenue. During 2004 JME signs a contract in the amount of \$10 million with the following data available: Costs incurred to date \$2,200,000 Billings to date \$2,000,000 Cash collected \$1,750,000 Total cost of project \$8,800,000 How much gross profit should JME recognize for 2004? A) -\$450,000. B) -\$200,000. C) \$1,133,333. D) \$300,000.

Current period gross profit= (costs to date/current contract cost completion)*contract gross profit- profit priory recognized (2.2/8.8)*1.2-0=300K In other words, in 2004 you executed 2.2/8.8=25% of the contract cost. Only the portion of profit equivalent to these 25% can be recognized, that is 25%*(10-8.8)=25%*1.2M=300K

JME has spent 88 % (8.8 Mil/10 Mil) of the total project costs. So JME should recognize 88 % of the total revenue. Total Revenue * .88 will give you the answer.

D? (\$2,200,000 / \$8,800,000) * Total Profit which is (10 mill - 8.8 mill)

stage of completion = 25%(2.2 / 8.8) revenue to be recognized = 0.25 × 10 million = 2.5 million gross profit = 2.5 million − 2.2 million = 300,000 Thanks Guys, and Map!

anytime pal!

Map I’m starting to panic and lose focus again. I bombed FSA/Quant on a Schweser exam tonight. Otherwise my gross score was 67. I’m trying to remain positive that I can greatly improve those topics in the next 4 days while reviewing everything else. Also I still need to read Ethics one of these days, which should go quick since I’m scoring in the 90s on Mock/Schweser exams. Ugh, I thought I would get a score of 90% this time around, but its looking like I will barely clear the hurdle.

You’re panicking. As an advise, you should avoid the forum for the next days. Keep it to a minimum. Everybody posting questions, from different sections, then the wait for the answer, then the frustration of not getting it correct, all are drawing you down, a waste of time and energy. Stay cool, get out of here. Sleep (or at least try to) well. If you need help on something and you think I can help, drop me an email.

Map1, what a great post. I’m going to take your advise to ditchdigger2CFA, as I’m starting to feel very anxious with the exam and all the posts on this forum. It might be a good time to get centered and focus. Thanks for the advise you inadvertently gave me : )

I got a POC correct on my own for once! Thanks Map1!

map1 Wrote: ------------------------------------------------------- > You’re panicking. As an advise, you should avoid > the forum for the next days. Keep it to a minimum. > Everybody posting questions, from different > sections, then the wait for the answer, then the > frustration of not getting it correct, all are > drawing you down, a waste of time and energy. > > Stay cool, get out of here. Sleep (or at least try > to) well. If you need help on something and you > think I can help, drop me an email. brilliant advice. i will try to start from now.