Superior Builders Has a Fixed -Price Contract Providing $120,000 of Revenue

question 60

Multiple Choice

Superior Builders has a fixed -price contract providing $120,000 of revenue. Construction on the contract was begun in 2010 and was completed in 2011. Information relating to the contract is as follows:

What amount of income should Superior recognize in 2011 assuming that the company appropriately uses the percentage-of-completion method of income recognition?

• A) $9,286
• B) $15,000
• C) $17,000
• D) $7,000

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Definitions:

Exercise Price

The set price at which an option contract can be exercised, determining the price at which the underlying security can be bought or sold.

Option Premium

The price that an investor pays to buy an options contract, which gives them the right, but not the obligation, to buy or sell an underlying asset at an agreed-upon price.

Profit or Loss

The financial result of an entity's operations and transactions, representing earnings exceeding costs or losses.

Derivative Security

A financial instrument whose value is dependent on the value of an underlying asset, such as options or futures.