Camelia Company Is a Large Commercial Real Estate Contractor That

question 78

Multiple Choice

Camelia Company is a large commercial real estate contractor that reports its income by the percentage of completion method. In 2017, the company entered into a contract to construct a building for $900,000. Camelia estimated that the cost of constructing the building would be $600,000. In 2017, the company incurred $150,000 in costs under the contract. In 2018, the company incurred an additional $500,000 in costs to complete the contract. The company's marginal tax rate in all years was 35%.

• A)Camelia must report $300,000 of income in 2017.
• B)Camelia is not required to report any income from the contract until 2018 when the contract is completed.
• C)Camelia must recognize $75,000 of income in 2017.
• D)Camelia should amend its 2017 tax return to decrease the profit on the contract for that year.
• E)None of the above.

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