Bergeron is a local manufacturer of off-shore drilling platforms.This year,Bergeron entered into a contract to construct a drilling platform,which will be placed in the North Atlantic Ocean.The total contract price is $5,000,000,and Bergeron estimates the total construction cost at $2,000,000.Actual costs incurred this year are $600,000.If Bergeron uses the completed contract method,the gross profit for this year is
A)$0.
B)$400,000.
C)$600,000.
D)$2,000,000.

Question

Quizplus · Accepted Answer

Using the completed contract method, gross profit is only recognized when the project is completed. Since the project is not yet completed, no gross profit should be recognized for this year. Therefore, the correct answer is A) $0.

Bergeron Is a Local Manufacturer of Off-Shore Drilling Platforms