Highrise Constructions Ltd had a large three-year project with total revenue of $5 000 000 and estimated total costs of $4 200 000. The project was 25 per cent complete at the end of the first year, 55 per cent complete at the end of the second year and 100 per cent complete at the end of the third year. Revenues and costs were as estimated. How much profit was earned during the third year if the completion of production method was used?
A) $360 000
B) $440 000
C) $800 000
D) None of the above

Question

Quizplus · Accepted Answer

Under the completion of production method, revenue and costs are recognized only when the project is fully complete. Therefore, the entire profit of $800,000 ($5,000,000 revenue - $4,200,000 costs) is recognized in the third year.

Highrise Constructions Ltd Had a Large Three-Year Project with Total