Boomtown Construction,Inc.enters into a contract to build a new football stadium for the Maine Lobster's football team.The contract price is $6,000,000 and Boomtown estimates the total cost of the contract to be $5,000,000.During the first year of work on the contract,Boomtown completes 40% of the work on the stadium at a cost of $2,000,000.Boomtown receives $1,000,000 when it signed the contract and an additional $1,800,000 payment in the first year based on the degree of completion.Which of the following statements concerning the income to be recognized from the contract is/are correct?
I.Boomtown must include the $2,800,000 payment it received in gross income.
II.Because the work is not yet completed,Boomtown has the option of not recognizing any income from the contract.
III.Boomtown includes the $1,800,000 payment in gross income based on the degree of completion because it does not have a claim of right to the $1,000,000.
IV.Boomtown must include $2,400,000 in gross income.

A)Only statement I is correct.
B)Only statements I and IV are correct.
C)Only statement III is correct.
D)Only statement IV is correct.
E)Only statements II and III are correct.

Question

Boomtown Construction,Inc.enters into a contract to build a new football stadium for the Maine Lobster's football team.The contract price is $6,000,000 and Boomtown estimates the total cost of the contract to be $5,000,000.During the first year of work on the contract,Boomtown completes 40% of the work on the stadium at a cost of $2,000,000.Boomtown receives $1,000,000 when it signed the contract and an additional $1,800,000 payment in the first year based on the degree of completion.Which of the following statements concerning the income to be recognized from the contract is/are correct?
I.Boomtown must include the $2,800,000 payment it received in gross income.
II.Because the work is not yet completed,Boomtown has the option of not recognizing any income from the contract.
III.Boomtown includes the $1,800,000 payment in gross income based on the degree of completion because it does not have a claim of right to the $1,000,000.
IV.Boomtown must include $2,400,000 in gross income.
​
A)Only statement I is correct.
B)Only statements I and IV are correct.
C)Only statement III is correct.
D)Only statement IV is correct.
E)Only statements II and III are correct.

Quizplus · Accepted Answer

The Answer of Boomtown Construction,Inc.enters into a contract to build a new football stadium for the Maine Lobster's football team.The contract price is $6,000,000 and Boomtown estimates the total cost of the contract to be $5,000,000.During the first year of work on the contract,Boomtown completes 40% of the work on the stadium at a cost of $2,000,000.Boomtown receives $1,000,000 when it signed the contract and an additional $1,800,000 payment in the first year based on the degree of completion.Which of the following statements concerning the income to be recognized from the contract is/are correct?
I.Boomtown must include the $2,800,000 payment it received in gross income.
II.Because the work is not yet completed,Boomtown has the option of not recognizing any income from the contract.
III.Boomtown includes the $1,800,000 payment in gross income based on the degree of completion because it does not have a claim of right to the $1,000,000.
IV.Boomtown must include $2,400,000 in gross income.
​
A)Only statement I is correct.
B)Only statements I and IV are correct.
C)Only statement III is correct.
D)Only statement IV is correct.
E)Only statements II and III are correct.