JKL Corporation is a large construction company with annual gross receipts, averaging $20 million annually.This year the corporation signed an agreement to construct a road for $720,000.Total estimated costs are $600,000.This year the corporation actually incurred costs of $240,000.For the year, JKL's gross profit on the contract will be

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JKL Corporation uses the percentage of completion method for recognizing revenue. The percentage of completion is calculated as actual costs incurred ($240,000) divided by total estimated costs ($600,000), which is 40%. The total contract price is $720,000, so 40% of this is $288,000. The gross profit is then $288,000 (revenue recognized) minus $240,000 (costs incurred), which equals $48,000.

JKL Corporation Is a Large Construction Company with Annual Gross