In Year 1 a Contractor Agrees to Build a Building

question 108

Multiple Choice

In year 1 a contractor agrees to build a building for $2,500,000 by the end of year 2.The builder's cost is estimated to be $1,800,000.The actual costs year 1 are $900,000 and year 2's actual costs are $1,100,000.Under the percentage of completion method year 2's gross profit is

• A)$150,000.
• B)$500,000.
• C)$700,000.
• D)$350,000.

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Definitions:

Tax Effect

The impact of taxes on financial decisions or operations, including how taxes influence the profitability, cash flow, and cost of different options.

Investment Allowance

A tax incentive that allows businesses to deduct a percentage of investment in certain assets from their income, encouraging capital investment.

Investment Allowance

A tax benefit that allows businesses to deduct a certain percentage of their investment in assets from their taxable income.

Traditional Capital Expenditure Analysis

A financial assessment method that evaluates the profitability or cost-effectiveness of long-term investment projects.