Use the Following Information for Questions

question 247

Multiple Choice

Use the following information for questions. Tuba Ltd.began work in 2014 on a contract for $1,250,000.Other data are: Revenue Recognition 6 - 19
-Beaver Builders Ltd.is using the completed-contract method for a $2,000,000 contract that will take two years to complete.Data at December 31, 2014, the end of the first year, are: The gross profit or loss that should be recognized for 2014 is

• A)$50,000 gross profit.
• B)$25,000 gross profit.
• C)$25,000 loss.
• D)$ 0.

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Definitions:

Capital Leases

Leases that are recognized by the lessee as an asset and liability on the balance sheet, based on the assumption that it involves the transfer of ownership over the lease term.

Balance Sheet

A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time, showing the company's financial position.

Operating Lease

A lease agreement for the use of an asset without ownership transfer.

IFRS

International Financial Reporting Standards, which are a set of accounting standards developed by the International Accounting Standards Board (IASB) that serve as a global framework for financial reporting.