Karr Construction Built a Levee for the State of Mississippi

question 104

Multiple Choice

Karr Construction built a levee for the state of Mississippi over a three-year period. The contracted price for the levee was $3,000,000. The costs incurred by Karr and the payments from the state over the three year period are as follows:
$\begin{array}{|l|c|c|c|r|}\hline & \mathbf{2 0 1 7} & \mathbf{2 0 1 8} & \mathbf{2 0 1 9} & \text { Total } \\\hline \begin{array}{l}\text { Costs incurred by } \\\text { Karr }\end{array} & \$ 600,000 & \$ 800,000 & \$ 200,000 & \$ 1,600,000 \\\hline \begin{array}{l}\text { Payments from } \\\text { Mississippi }\end{array} & \$ 1,200,000 & \$ 800,000 & \$ 1,000,000 & \$ 3,000,000 \\\hline\end{array}$
If revenue is recognized in proportion to the costs incurred by Karr, how much net income is reported in 2018?

• A)$200,000
• B)$400,000
• C)$700,000
• D)$800,000

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