Yang Construction Company Entered into a Contract to Build a New

question 45

Multiple Choice

Yang Construction Company entered into a contract to build a new airport terminal for $2,500,000. Construction commenced on August 1, 2020, with a planned completion date of December 31, 2022. A summary of the costs, billings, and collections is provided below: $$\begin{array} { | l | r | r | r | } \hline & \mathbf { 2 0 2 0 } & \mathbf { 2 0 2 1 } & \mathbf { 2 0 2 2 } \\\hline \text { Costs incurred during the year } & 500,000 & 700,000 & 1,100,000 \\\hline \text { Estimated costs to complete at year end } & 1,500,000 & 1,200,000 & 0 \\\hline \text { Billings during the year } & 440,000 & 1,000,000 & 1,060,000 \\\hline \text { Cash collections during the year } & 400,000 & 900,000 & 1,200,000 \\\hline\end{array}$$ Yang uses the percentage of completion method. How much gross profit would Yang recognize in 2021?

• A)$100,000 loss
• B)$75,000 loss
• C)$50,000 profit
• D)$100,000 profit

---

Definitions:

Cash Account

An account that shows the amount of cash a company has on hand or in the bank.

Cash Dividends

Profit distributions paid out by a corporation to its shareholders.

Net Income

The company's overall earnings following the subtraction of all costs, taxes, and expenses from the total income.

Investing Activities

Transactions related to the acquisition or disposal of long-term assets and investments, usually reflected in the investing section of the cash flow statement.