In Year 1 a Contractor Agrees to Build a Building

question 75

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 $1,300,000.Under the completed contract method the gross profit for year 2 is

• A)$0.
• B)$300,000.
• C)$350,000.
• D)$700,000.

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Definitions:

Promisor

An individual or entity that makes a promise or commitment in a contract to perform some specified action in the future.

Promisee

The person to whom a promise is made in a contract, to whom the promisor has an obligation.

Promissory Estoppel

A legal principle that prevents a person from going back on a promise, even if it was not formally made as a contract, if it was reasonable to rely on that promise and doing so caused harm.

Refund

A repayment to someone of money they have previously paid.