In Year 1,a contractor agrees to build a building for $2,500,000 by the end of Year 2.The builder's cost is estimated to be $1,800,000.The actual costs for Year 1 are $900,000 and Year 2's actual costs are $1,300,000.Under the completed contract method the gross profit for Year 2 is
A)$0.
B)$300,000.
C)$350,000.
D)$700,000.

Question

Quizplus · Accepted Answer

Gross profit = (Contract price - Estimated cost) x (Actual costs for the year / Estimated total costs)= ($2,500,000 - $1,800,000) x ($1,300,000 / $1,800,000)= $700,000 x 0.7222= $350,000

In Year 1,a Contractor Agrees to Build a Building for $2,500,000