Robin Construction Company Began a Long-Term Contract in 2011

question 78

Multiple Choice

Robin Construction Company began a long-term contract in 2011.The contract price was $600,000.The estimated cost of the contract at the time it was begun was $450,000.The actual cost incurred in 2011 was $300,000.The contract was completed in 2012 and the cost incurred that year was $180,000.Under the percentage of completion method:

• A) Robin should report $300,000 of income in 2011.
• B) Robin should report a $30,000 loss in 2012.
• C) Robin must pay interest (under the look-back method) on the overpayment of taxes in 2011.
• D) Robin should report $60,000 profit on the contract in 2012.
• E) Robin will receive interest (under the look-back method) on the overpayment of taxes in 2011.

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Definitions:

P-value

The probability of obtaining test results at least as extreme as the ones observed during the test, assuming that the null hypothesis is true.

Null Hypothesis

A statistical hypothesis which proposes no significant difference or effect, used as a default assumption until evidence suggests otherwise.

Alpha Level

The probability threshold that determines the critical value for rejecting the null hypothesis in hypothesis testing, commonly set at 0.05 or 5%.

Rejection Region

In hypothesis testing, the range of values for which the null hypothesis is considered unlikely and thus rejected.