For the year ended December 31, 2015, Cooper would recognize gross profit on the building of:
A) $632,500
B) $690,000
C) $810,000
D) $0

Question

Quizplus · Accepted Answer

Gross profit is calculated as revenue minus cost of goods sold. The revenue for the building is given as $1,800,000. To calculate the cost of goods sold, we need to add up the direct costs of labor, materials, and subcontractors. These costs are given as $500,000, $350,000, and $250,000 respectively. Therefore, COGS is $1,100,000 ($500,000 + $350,000 + $250,000). Gross profit is calculated as $700,000 ($1,800,000 - $1,100,000). However, the question asks for the gross profit recognized in 2015, not the total gross profit. Since the building was not completed in 2015, no gross profit can be recognized in that year. Therefore, the answer is $0 for gross profit recognized in 2015. However, if we were calculating the total gross profit for the entire project, the answer would be B, $690,000.

For the Year Ended December 31, 2015, Cooper Would Recognize