Question:
Refer to the situation described in BE 5–7. The building was completed during the second year.
Construction costs incurred during the second year were $10 million. How much gross profit will the
company recognize in the first year and in the second year applying the completed contract method?
Answer:
Year 1 = 0
Year 2 = $4 million
Revenue $20,000,000
Less: Costs in year 1 (6,000,000)
Costs in year 2 (10,000,000)
Actual profit $ 4,000,000
Refer to the situation described in BE 5–7. The building was completed during the second year.
Construction costs incurred during the second year were $10 million. How much gross profit will the
company recognize in the first year and in the second year applying the completed contract method?
Answer:
Year 1 = 0
Year 2 = $4 million
Revenue $20,000,000
Less: Costs in year 1 (6,000,000)
Costs in year 2 (10,000,000)
Actual profit $ 4,000,000
