In Year 1, Northern Construction Agrees to Build a Fire $\text { Year } 1 \quad \text { Year } 2$

question 72

Multiple Choice

In year 1, Northern Construction agrees to build a fire station that will be completed in year 2.Construction starts in year 1.The station will have costs of $2,000,000 in year 1 and $2,000,000 in year 2.Northern receives payment for the station of $5,000,000 in advance, in year 1.If Northern uses the completed contract method, what net profit is recognized by Northern in each year?
$\text { Year } 1 \quad \text { Year } 2$

• A)\(\$ 0 \quad \$ 1,000,000\)
• B)\(\$ 1,000,000 \quad \$ 0\)
• C)\(\$ 3,000,000 \quad(\$ 2,000,000)\)
• D)\(\$ 500,000 \quad \$ 500,000\)
• E)\(\$ 250,000 \quad \$ 750,000\)

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