Carbon Corporation Had a $2,000,000 Contract to Build a Small

question 5

Multiple Choice

Carbon Corporation had a $2,000,000 contract to build a small hospital with total costs estimated at $1,600,000.It received the following payments and incurred the following expenses over the three-year contract period:
Under the percentage-of-completion method, how much profit should Carbon recognize in year 1?

• A)$0
• B)$75,000
• C)$100,000
• D)$400,000

---

Definitions:

Day-to-Day Operations

Routine activities and tasks necessary for the ongoing functioning of a business or organization.

Work in Process Inventory

Goods that are partially completed in the production process, including the accumulation of labor, material, and overhead costs.

Manufacturing Costs

Expenses related to the production of goods, including direct materials, direct labor, and manufacturing overhead.

Cost of Goods Manufactured

Cost of Goods Manufactured is the total production cost of goods completed during a specific period, including costs of materials, labor, and overhead.