In Year 1, Southern Construction Agrees to Construct a School $\text { Year } 1 \quad \text { Year } 2$

question 122

Multiple Choice

In year 1, Southern Construction agrees to construct a school building for $12,000,000, receiving payments for the work of $6,000,000 in both year 1 and year 2.Southern estimates that the costs will be $4,000,000 in Year 1 and $6,000,000 in Year 2.If Southern uses the percentage-of-completion method (based on total costs) , what amount of profit is recognized in each year of the contract?
$\text { Year } 1 \quad \text { Year } 2$

• A)\(\$ 0 \quad \$ 2,000,000\)
• B)\(\$ 2,000,000 \quad \$ 0\)
• C)\(\$ 1,000,000 \quad \$ 1,000,000\)
• D)\(\$ 800,000 \quad \$ 1,200,000\)
• E)\(\$ 2,000,000 \quad \$ 1,000,000\)

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