Beaver Builders, Ltd

question 18

Multiple Choice

Beaver Builders, Ltd.is using the completed-contract method for a $4,100,000 contract that will take two years to complete.Data at December 31, 2010, the end of the first year, are: The gross profit or loss that should be recognized for 2010 under the earnings approach is

• A)$0.
• B)a $50,000 loss
• C)a $50,000 gross profit
• D)a $100,000 gross profit

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Definitions:

Note Payable

A formal written agreement to repay a borrowed amount of money, including terms such as interest rate and maturity date.

Accounts Payable

The amounts owed by a business to its suppliers or creditors for goods and services received but not yet paid for.

Promissory Note Receivable

This is a financial asset representing a written promise by one party to pay a specified sum of money to another party under agreed terms.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan remaining.