In Year 1,a Contractor Agrees to Build a Building for $2,500,000

question 74

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 for 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:

Understand Obligations

Recognizing and comprehending the duties and responsibilities that are part of an agreement or contract.

Capacity

The legal ability or competency of a person or entity to enter into binding contracts or perform certain acts.

Illegal Clause

A provision in a contract that is prohibited by law and therefore unenforceable.

Sever

To cut off or divide property interests or legal relationships.