Jackson Construction built a levee for the state of Mississippi over a three-year period.The contracted price for the levee was $1,200,000.The costs incurred by Jackson and the payments from the state over the three year period are as follows:
- If revenue is recognized when payments are received, which of the following present the net income amounts reported in 2009, 2010, and 2011, respectively?
A) $500,000; $300,000; $400,000
B) $200,000; $100,000; $300,000
C) $400,000; $400,000; $400,000
D) $300,000; $200,000; $100,000

Question

Jackson Construction built a levee for the state of Mississippi over a three-year period.The contracted price for the levee was $1,200,000.The costs incurred by Jackson and the payments from the state over the three year period are as follows:  
- If revenue is recognized when payments are received, which of the following present the net income amounts reported in 2009, 2010, and 2011, respectively?
A) $500,000; $300,000; $400,000 
B) $200,000; $100,000; $300,000 
C) $400,000; $400,000; $400,000 
D) $300,000; $200,000; $100,000

Quizplus · Accepted Answer

If revenue is recognized when payments are received, net income is based on cash receipts. The amounts in option B reflect a decreasing trend in payments received over the years, which aligns with the cash basis of accounting.

Jackson Construction Built a Levee for the State of Mississippi