During 2014, Gates Corp

question 7

Multiple Choice

During 2014, Gates Corp. started a construction job with a total contract price of $14,000,000. The job was completed on December 15, 2015. Additional data are as follows: Under the completed-contract method, what amount should Gates recognize as gross profit for 2015?

• A) $900,000
• B) $1,250,000
• C) $1,900,000
• D) $2,500,000

Calculate and interpret profit margin for divisions or companies.

Identify the responsibilities and performance measures of investment centers.

Apply concepts of residual income in evaluating business performance.

Distinguish between cost centers, profit centers, and investment centers in organizational structures.

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Definitions:

Hurdle Rate

The project cost of capital, or discount rate. It is both the rate used in discounting future cash flows in the net present value method and the rate that is compared to the internal rate of return.

Intrinsic Value

The actual value of a company, asset, or currency determined through fundamental analysis without reference to its market value.

Risk-Adjusted

Pertaining to the modification of financial analysis or return on an investment to account for the risk involved, ensuring a more accurate assessment of performance or value.

Preferred Stock

Preferred Stock is a class of ownership in a corporation that has a higher claim on assets and earnings than common stock, often entitling holders to fixed dividends but with limited or no voting rights.