The percentage of completion profit for a particular project of Redgate Ltd was $200 000 for year 1 and $220 000 for year 2 (completion).
-What difference would there be to the total profit for the two years if the completion of production method were used?
A) Profit would be $200 000 higher.
B) Profit would be $420 000 higher.
C) Profit would be $420 000 lower.
D) There would be no difference.

Question

Quizplus · Accepted Answer

Under the completion of production method, profit is recognized only upon project completion. Since the total profit recognized over the two years under the percentage of completion method ($200,000 + $220,000 = $420,000) would be the same as the total profit recognized at the end of year 2 under the completion of production method ($420,000), there would be no difference in the total profit for the two years.

The Percentage of Completion Profit for a Particular Project of Redgate