The profit for a particular project of Blue Fin Ltd, using the percentage of completion method, was $470 000 for year 1 and $690 000 for year 2 (completion). What difference would there be to profit for year 1 if the completion of production method were used?
A) Profit would be $470 000 lower.
B) Profit would be $470 000 higher.
C) Profit would be $690 000 higher.
D) There would be no difference.

Question

Quizplus · Accepted Answer

Under the completion of production method, profit is recognized only upon project completion. Therefore, in year 1, no profit would be recognized, making the profit $470,000 lower compared to recognizing $470,000 using the percentage of completion method.

The Profit for a Particular Project of Blue Fin Ltd