The following data pertains to Pell Co.'s construction jobs, which commenced during the current year:
Project 1 Project 2
Contract price $420,000 $300,000
Costs incurred during the year 240,000 280,000
Estimated costs to complete 120,000 40,000
Billed to customers during the year 150,000 270,000
If Pell used the percentage of completion method, what amount of gross profit (loss) would Pell report in its current year income statement?
Answer is (20,000)
I understand project 1 gross profit is 40,000
and project 2 loss which is to be recognized immediately is (20,000) <- 300k-320k
So, I thought the answer is the sum of those 2 -> positive 20,000
but why is the answer negative 20k.. I don't get it.. someone help me!!