The Key Largo Company uses the percentage-of-completion method to recognize profits on long-term contracts.At the end of the second year of the contract, a project was 70% complete and an overall loss of $100, 000 was expected.A $20, 000 profit had been recognized in the first year of the contract.The loss to be recognized in the second year is
A)$ 70, 000
B)$ 80, 000
C)$100, 000
D)$120, 000
E)none of these

Question

Quizplus · Accepted Answer

In the second year, the company must recognize the total expected loss of $100,000 minus the $20,000 profit already recognized in the first year, resulting in a $120,000 loss to be recognized in the second year.

The Key Largo Company Uses the Percentage-Of-Completion Method to Recognize