medium · Financial Accounting revenue-recognition

If a construction project uses the cost-to-cost method and the company purchases $1,000,000 of steel but stores it at a third-party warehouse without using it yet on the project site, how does this affect the 'percentage of completion' calculation?

1. It is included in the numerator, but only after the total contract price is separately adjusted downward to reflect the unused materials.
2. It is included in both the numerator and the denominator equally, so the percentage of completion stays unchanged.
3. It is included in the numerator simply because the cash for the steel has already been spent by the contractor.
4. It is excluded from the numerator of the percentage of completion because it hasn't been used to satisfy the performance obligation.

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