Kirby Builders, Inc. is using the completed-contract method for a $5,600,000 contract that will take two years to complete. Data at December 31, 2008, the end of the first year, are as follows:
The gross profit or loss that should be recognized for 2008 is
A) $0.
B) a $240,000 loss.
C) a $120,000 loss.
D) a $105,600 loss.

Question

Kirby Builders, Inc. is using the completed-contract method for a $5,600,000 contract that will take two years to complete. Data at December 31, 2008, the end of the first year, are as follows:
 The gross profit or loss that should be recognized for 2008 is
A) $0. 
B) a $240,000 loss. 
C) a $120,000 loss. 
D) a $105,600 loss.

Quizplus · Accepted Answer

$5,600,000 - ($2,560,000 + $3,280,000) = -$240,000.