Lagory Co. started a contract in June 2011 to build a bridge at a fixed price of $14 million. The bridge was to be completed by October 2013. Total cumulative costs incurred by the end of December 2011 and 2012 were $2 million and $6 million, respectively. Lagory Co. is unable to estimate the total costs of the project prior to completion. Final costs at the end of the project totalled $11 million. How much revenue will Lagory Co. report in 2012?
A)$2,000,000
B)$3,000,000
C)$4,000,000
D)$14,000,000

Question

Quizplus · Accepted Answer

Lagory Co. cannot estimate total costs, so it uses the completed contract method. Revenue is recognized only upon project completion, so no revenue is reported in 2012.

Lagory Co Started a Contract in June 2011 to Build a a Bridge