Carbon Corporation Had a $2,000,000 Contract to Build a Small

question 7

Multiple Choice

Carbon Corporation had a $2,000,000 contract to build a small hospital with total costs estimated at $1,600,000.It received the following payments and incurred the following expenses over the three-year contract period:
$\begin{array}{lll}\underline{\text { Year } }&\underline{ \text { Payments }}& \underline{\text { Expenses }}\\1 & \$ 400,000 & \$ 300,000 \\2 & \$ 1,200,000 & \$ 900,000 \\3 & \$ 400,000 & \$ 550,000\end{array}$

Under the percentage-of-completion method, how much profit should Carbon recognize in year 2?

• A)$400,000
• B)$300,000
• C)$225,000
• D)$150,000

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Definitions:

Enterprise Contract

A contractual agreement between businesses, or between a business and an individual, that typically involves provision of goods or services.

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The process by which business leaders and managers choose among alternative strategies or actions to achieve organizational goals.

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A social movement and union campaign initiated by the Service Employees International Union (SEIU) focused on improving wages, benefits, and working conditions for janitors through collective bargaining.

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A collective group action aimed at promoting or resisting change in society, based on shared values and common objectives.