Question $3$:

Revenue Recognition $in$ Long$-$Term Contracts with Changes and Errors

$On$ January $1,2022,$ Apex Contractors signed $a12,000,000$ fixed$-$price contract $to$ build $a$

commercial complex, estimated $tocost9,000,000$ and complete $by$ December $31,2024.$ Apex

uses the percentage$-of-$completion method $(cost-to-cost$ basis$).$ Data for $2022-2023$:

$2022$: Costs incurred $3,600,000$; Billings $4,000,000$; Collections $3,500,000$; Estimated

remaining costs $5,400,000.$

$2023$: Costs incurred $4,200,000$; Billings $5,000,000$; Collections $4,800,000$; Estimated

remaining costs $2,800,000(revised$ due $to$ efficiency gains$).$

$In2024,$ during the audit, errors are discovered:

$2022$ costs were overstated $by300,000$ due $to$ unrecorded inventory $on$ site $(shouldbe$ excluded

from costs incurred$).$

$2023$ billings included $500,0002,500,000,$ billings $3,000,000,$ collections $3,700,000,$ and

project completion