Reference no: EM132787193
Information on Sunny Day Construction Firm's three-year construction contract with a customer is shown below:
Contract price ?9,000,000
Estimated costs at contract inception ?8,000,000
Information on actual costs, billings and collections during construction period:
Actual costs incurred per year 20x1 - 1,944,000 20x2 - 5,232,000 20x3 - 1,844,000
Estimated costs to complete 20x1 - 6,156,000 20x2 - 2,024,000 20x3 - 0
Billings 20x1 - 1,800,000 20x2 - 4,950,000 20x3 - 2,250,000
Collections 20x1 - 1,620,000 20x2 - 4,455,000 20x3 - 2,925,000
Sunny Day uses the percentage of completion (based on costs) in recognizing revenues and profits from the contract.
Problem 1: How much net profit (loss) is recognized in 20x2?
a. (200,000)
b. 216,000
c. 200,000
d. (416,000)