Under the percentage-of-completion method,how much profit (loss)should Carbon recognize in year 3?
A)($150,000)
B)($50,000)
C)$150,000
D)$250,000

Question

Quizplus · Accepted Answer

Under the percentage-of-completion method, the profit or loss is recognized based on the percentage of the project completed. In year 3, the total costs incurred are $600,000 ($200,000 in year 1 + $400,000 in year 2), and the total contract revenue is $550,000 ($700,000 x 0.7857). This means that the project is experiencing a loss of $50,000 ($550,000 - $600,000). Therefore, the answer is option B, which represents the loss of $50,000.

Under the Percentage-Of-Completion Method,how Much Profit (Loss)should Carbon Recognize in Year