Parker Construction Co. uses the percentage-of-completion method. In 2008, Parker began work on a contract for $5,500,000; it was completed in 2009. The following cost data pertain to this contract:
The amount of gross profit to be recognized on the income statement for the year ended December 31, 2009 is
A) $800,000.
B) $860,000.
C) $900,000.
D) $2,150,000.

Question

Parker Construction Co. uses the percentage-of-completion method. In 2008, Parker began work on a contract for $5,500,000; it was completed in 2009. The following cost data pertain to this contract:
 The amount of gross profit to be recognized on the income statement for the year ended December 31, 2009 is
A) $800,000. 
B) $860,000. 
C) $900,000. 
D) $2,150,000.

Quizplus · Accepted Answer

[$1,950,000 ÷ ($1,950,000 + $1,300,000)] × $2,250,000 = $1,350,000
($5,500,000 - $3,350,000) - $1,350,00 = $800,000