Lark Corphas a Contract to Construct a $5,000,000 Cruise Ship at at an Estimated

question 74

Multiple Choice

Lark Corp.has a contract to construct a $5,000,000 cruise ship at an estimated cost of $4,000,000.The company will begin construction of the cruise ship in early January 2011 and expects to complete the project sometime in late 2014.Lark Corp.has never constructed a cruise ship before, and the customer has never operated a cruise ship.Due to this and other circumstances, Lark Corp.believes there are inherent hazards in the contract beyond the normal, recurring business risks.Lark Corp.expects to recover all its costs under the contract.During 2011 and 2012, the company has the following activity:

On its statement of financial position at December 31, 2012, what amount will be reported for accounts receivable?

• A)$352,000.
• B)$720,000.
• C)$72,000.
• D)$2,000,000.

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Definitions:

Cost-Benefit Analysis

An economic evaluation method where the benefits of an action or project are weighed against its costs.

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Philosophical Analysis

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Morality Policy Making

The process of creating laws and policies based on ethical considerations and moral values.