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How much income must klondike report for the third year

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Reference no: EM132106880

Question - Klondike Construction Company is building a highway under a three-year construction contract. Klondike will receive $11,200,000 for building five miles of highway. Klondike estimates that it will incur $10,000,000 of costs before the contract is completed.

At the end of year one, Klondike had incurred $3,000,000 of contract costs.

a. How much income from the contract must Klondike report for year one?

b. Assume Klondike incurs an additional $5,000,000 of costs during the second year. How much income should be reported for that year?

c. If Klondike incurs another $2,500,000 of costs in the third and final year of the contract, how much income must Klondike report for the third year?

d. Will Klondike receive or pay look-back interest?

Reference no: EM132106880

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