Pool Contractors (PC)entered into a contract to build a solar heated swimming complex for $1,800,000.Construction commenced on July 1,2017,with a planned completion date of December 31,2019.A summary of the related accounting information is provided below:

How much gross profit would be recognized in fiscal 2018 if PC uses the percentage of completion method?
A)$50,000
B)$100,000
C)$130,000
D)$180,000

Question

Pool Contractors (PC)entered into a contract to build a solar heated swimming complex for $1,800,000.Construction commenced on July 1,2017,with a planned completion date of December 31,2019.A summary of the related accounting information is provided below:

How much gross profit would be recognized in fiscal 2018 if PC uses the percentage of completion method?
A)$50,000 
B)$100,000 
C)$130,000 
D)$180,000

Quizplus · Accepted Answer

C)Gross profit 2017: $400,000 / ($400,000 + $1,200,000)× ($1,800,000 - $1,600,000)= $50,000
% complete 2018: ($400,000 + $500,000)/ ($400,000 + $500,000 + $600,000)= 60% complete
Gross profit 2018:
[($1,800,000 - $1,500,000)× 60%] - 2017 GP
= $180,000 - $50,000
= $130,000

Pool Contractors (PC)entered into a Contract to Build a Solar