How much revenue will ohara recognize in the first year

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Question - O'Hara Company recognizes revenue on long-term construction contracts under IFRS. It cannot estimate progress toward completion accurately, and so uses the cost recovery method (also called the "zero profit method") to estimate revenue. O'Hara writes a contract to deliver an automated assemtly line to Eastley Motors. Eastley will pay $2,000,000 to O'Hara, and O'Hara estimates the line will cost $1,500,000 to construct. The job is estimated to take three years to complete. In the first year of its contract with Easley Motors, O'Hara incurs $1,000,000 of cost, which O'Hara believes will eventually be recovered in the contract. How much revenue will O'Hara recognize in the first year of the contract?

$1,000,000

$0

$1,333,333

$666,667

Reference no: EM132083886

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