Use the Following Information for the Following Questions:
in 2020 $\ldots \ldots \ldots \ldots \ldots \ldots \ldots\$150,000$

question 36

Multiple Choice

Use the following information for the following questions:
In 2020, Cement Inc. began a three year construction contract for $ 3,500,000. Cement uses the percentage-of-completion method. The income to be recognized each year is based on the proportion of costs incurred to total estimated costs for completing the contract. The financial statement presentation relating to this contract for calendar 2020 follow:
Statement of Financial Position
Current assets:
Accounts receivable $\ldots \ldots \ldots \ldots \ldots \ldots \ldots\$150,000$
Contract asset/liability $\ldots \ldots \ldots \ldots \ldots \ldots \ldots105,000$
Contract costs $\$ 425,000$ less Billings of $\$ 320,000$ )

Income Statement
Income (before tax) on the contract recognized in $2020 \ldots \ldots \ldots . . \quad \$ 105,000$
-What was the initial estimated gross profit on this contract?

• A) $ 381,430
• B) $ 405,231
• C) $ 650,204
• D) $ 864,703

---

Definitions:

Environmental Changes

Alterations in the external conditions that can impact an organization's operations and strategies.

Product Delivery

The process of moving goods from the production location to the place where they will be used or consumed.

Informal Learning

An unstructured and non-institutionalized form of learning that occurs in various contexts outside of a formal educational environment, often resulting from daily activities related to work, family, or leisure.

Departmentalisation

Departmentalisation is the process of grouping together people and jobs into work units.