A Construction Company Uses the Percentage-Of-Completion Method for Long-Term Construction

question 49

Multiple Choice

A construction company uses the percentage-of-completion method for long-term construction contracts.A particular job was begun in 2014 and completed in 2015.During 2014,it appeared that the project would cost 25 percent more than originally expected.Data at the end of each year are given below:

The contract price was $700,000.Assuming the company properly recorded income in 2013,how much income should be recorded in 2014?

• A)$10,000
• B)$42,000
• C)$160,000
• D)$192,000

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Definitions:

Selling Prices

The amount a customer pays to purchase a product or service from a seller.

Variable Costs

Expenses that vary with the amount of output or sales.

Fixed Costs

Expenses that do not change in proportion to the activity of a business, such as rent or salaries.

Break-Even Point

The level of production or sales at which total revenues equal total expenses, resulting in neither profit nor loss.