Gunner Construction,Inc.has consistently used the percentage-of-completion method of recognizing revenue.During 2014,Gunner started work on a $2,500,000 fixed-price construction contract.The accounting records disclosed the following data for the year ended December 31,2014:

How much loss should Gunner have recognized in 2014?
A)$15,000
B)$35,000
C)$50,000
D)$315,000

Question

Gunner Construction,Inc.has consistently used the percentage-of-completion method of recognizing revenue.During 2014,Gunner started work on a $2,500,000 fixed-price construction contract.The accounting records disclosed the following data for the year ended December 31,2014:

How much loss should Gunner have recognized in 2014?

How much loss should Gunner have recognized in 2014?
A)$15,000 
B)$35,000 
C)$50,000 
D)$315,000

Quizplus · Accepted Answer

Based on the calculation of the percentage of completion method, total cost incurred in 2014 was $2,065,000, which is greater than the corresponding revenue recognized of $2,015,000. Therefore, Gunner Construction incurred a loss of $50,000 ($2,015,000 - $2,065,000). The correct answer choice is C.