Determine what amount textron recognize as gross profit

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Reference no: EM132592006

In early 20X1, Textron Inc. entered into an agreement with Scantech Ltd. for the construction of a new office building. Construction is expected to take three years to complete. The initial total estimated cost of the building was $28 million, and the price of the contract was set at $38 million. At December 31, 20X1, the total cumulative cost incurred was $18 million. Due to increasing costs of materials, the total estimated cost of the project at the end of 20X1 was $31 million. By the end of the 20X2 fiscal year, an additional $9 million of costs was incurred. At December 31, 20X2, the total estimated cost of the project remained the same as at December 31, 20X1.

Question 1: What amount should Textron recognize as gross profit (the profit element) for the December 31, 20X2, fiscal year?

a) $2.0 million

b) $3.2 million

c) $4.0 million

d) $6.1 million

Reference no: EM132592006

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