Gleason Construction Enters into a Long-Term Fixed Price Contract to Build

question 139

Multiple Choice

Gleason Construction enters into a long-term fixed price contract to build an office building for $30,000,000. In the first year of the contract Gleason incurs $8,000,000 of cost and the engineers determined that the remaining costs to complete are $12,000,000. How much gross profit or loss should Gleason recognize in Year 1 assuming the use of the percentage-of-completion method? (Round the gross profit percentage to 4 decimal places)

• A) $22,000,000 profit
• B) $18,000,000 loss
• C) $4,000,000 profit
• D) $12,000,000 loss

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Definitions:

Diffusion Of Responsibility

The feeling among bystanders at an emergency that the responsibility for helping is shared by the group, making each person feel less compelled to act than if he or she alone bore the total responsibility.

Darley And Latané

Psychologists known for their research on the bystander effect, illustrating how individual responsibility is diluted in the presence of others.

Bystander Effect

A behavioral pattern observed in social psychology where people are less inclined to assist someone in need when there are others around.

Cognitive-Neoassociationistic Model

A theory proposing that cognition and emotions are linked in a network of associations, affecting how stimuli are processed and reactions are generated.