L/T CONSTRUCTION – MCQ

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  • #2102883

    asdf
    Participant

    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!!

    #2103264

    Mae
    Participant

    This is on another page — but the (20,000) is the answer for completed contract.

    You are correct that the $20,000 is the percentage of completion answer.

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