Nova Construction Company (NCC)entered into a Contract to Build a School

question 59

Multiple Choice

Nova Construction Company (NCC) entered into a contract to build a school for $1,800,000. Construction commenced on May 1, 2020, with a planned completion date of December 31, 2022. A summary of the related accounting information is provided below: $$\begin{array} { | l | r | r | r | } \hline & \mathbf { 2 0 2 0 } & \mathbf { 2 0 2 1 } & \mathbf { 2 0 2 2 } \\\hline \text { Costs incurred during the year } & 400,000 & 500,000 & 650,000 \\\hline \text { Estimated costs to complete at year end } & 1,200,000 & 600,000 & 0 \\\hline \text { Billings during the year } & 560,000 & 640,000 & 600,000 \\\hline \text { Cash collections during the year } & 500,000 & 310,000 & 990,000 \\\hline\end{array}$$ How much gross profit would be recognized in fiscal 2020 if NCC uses the percentage of completion method?

• A)$50,000
• B)$100,000
• C)$130,000
• D)$180,000

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Definitions:

Market Output

The total quantity of a good or service produced and sold by firms in a particular market.

Intertemporal Price Discrimination

A pricing strategy where prices are varied over time for the same product to exploit differences in willingness to pay.

Second-Degree Price Discrimination

A pricing strategy where prices vary according to the quantity consumed or the version of the product, without personal characteristics of the buyer influencing the price.

First-Degree Price Discrimination

A pricing strategy where a seller charges each buyer their maximum willingness to pay, capturing all consumer surplus.