Gleason Construction enters into a long-term fixed price contract to build an office building for $20,000,000.In the first year of the contract Camey incurs $6,000,000 of cost and the engineers determined that the remaining costs to complete are $10,000,000.How much gross profit or loss should Gleason recognize in Year 1 assuming the use of the completed-contract method?
A)$0
B)$4,000,000 profit
C)$4,000,000 loss
D)$375,000 profit

Question

Quizplus · Accepted Answer

Under the completed-contract method, revenue and gross profit are recognized only when the contract is completed. Therefore, no gross profit or loss is recognized in Year 1.

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