Tullis Construction enters into a long-term fixed price contract to build an office tower for $11,000,000. In the first year of the contract. Tullis incurs $3,000,000 of cost and the engineers determined that the remaining costs to complete are $5,000,000. Tullis billed $3,700,000 in year 1 and collected $3,200,000 by the end of the end of the year. Refer to Tullis Corporation. How much gross profit should Tullis recognize in Year 1 assuming the use of the completed-contract method?
A) $0
B) $2,300,000
C) $3,000,000
D) $8,000,000

Question

Quizplus · Accepted Answer

Under the completed-contract method, revenue and gross profit are recognized only when the contract is completed. Therefore, Tullis should recognize $0 gross profit in Year 1.

Tullis Construction Enters into a Long-Term Fixed Price Contract to Build