The Key Largo Company Uses the Percentage-Of-Completion Method to Recognize

question 62

Multiple Choice

The Key Largo Company uses the percentage-of-completion method to recognize profits on long-term contracts.At the end of the second year of the contract, a project was 70% complete and an overall loss of $100, 000 was expected.A $20, 000 profit had been recognized in the first year of the contract.The loss to be recognized in the second year is

• A)$ 70, 000
• B)$ 80, 000
• C)$100, 000
• D)$120, 000
• E)none of these

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Definitions:

Forming Department

A section in manufacturing where raw materials are shaped or formed into parts for further production processes.

Machine-Hours

The total hours that machinery is operated during the production process.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual products or jobs, based on a predetermined formula, prior to actual production.

Customizing Department

A division within a company that modifies products to meet specific requirements or preferences of customers.