Exhibit 18-1 in 2010, Alpha Construction Began Work on a Contract

question 22

Multiple Choice

Exhibit 18-1 In 2010, Alpha Construction began work on a contract with a price of $850, 000 and estimated costs of $595, 000.Data for each year of the contract are as follows:
$\begin{array}{llll}&2010&2011&2012\\\text { Costs incurred chring the year } & \$ 238,000 & \$ 319,600 & \$ 105,000 \\\text { Estimated costs to complete } & 357,000 & 139,400 & -0- \\\text { Partial billings } & 260,000 & 210,000 & 380,000 \\\text { Collections } & 240,000 & 200,000 & 410,000\end{array}$

- Refer to Exhibit 18-1.Under the percentage-of-completion method of revenue recognition, gross profit in 2010 would be

• A)$102, 000
• B)$260, 000
• C)$255, 000
• D)$425, 000

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Definitions:

Even Dollar Increments

A pricing strategy where goods or services are priced in whole dollar amounts rather than including cents.

Complete Stranger

A person whom one does not know or with whom one is not familiar.

Expected Loss

The predicted amount of loss a business might suffer due to risks, calculated as the sum of all possible losses multiplied by their respective probabilities.

Weak Axiom

A principle used in consumer choice theory that stipulates if a consumer chooses bundle A over bundle B when both are affordable, then the consumer should not choose B over A when prices change, holding income constant.