Brierton Company Enters a Contract at the Beginning of Year

question 32

Multiple Choice

Brierton Company enters a contract at the beginning of year 1 to build a new federal courthouse for a price of $16 million. Brierton estimates that total cost of the project will be $12 million and will take four years to complete. $\begin{array}{lll}&\text { Costs incurred }&\text { Payments from federal}\\&&\text { government}\\\text { Year 1 } & \$ 4 \text { million } & \$ 2 \text { million } \\\text { Year 2 } & \$ 4 \text { million } & \$ 2 \text { million } \\\text { Year 3 } & \$ 2 \text { million } & \$ 6 \text { million } \\\text { Year 4 } & \$ 2 \text { million } & \$ 6 \text { million }\end{array}$
-If Brierton used cash accounting to account for this project, what would they have reported as profit (loss) in year 2?

• A)$0
• B)$1.33 million
• C)$(2 million)
• D)$(4 million)

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