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Report gross profit

Reese Construction Corporation contracted to construct a building for $1,500,000. Construction began in 2007 and was completed in 2008. Data relating to the contract are summarized below:

Year Ended
Dec. 31
2007 2008
Costs incurred $600,000 $450,000
Estimated cost to complete $400,000 -0-

Reese uses the percentage-of-completion method as the basis for income recognition. For the years ended December 31, 2007, and 2008, respectively, Reese should report gross profit of

A. $270,000 and $180,000.

B. $300,000 and $150,000.

C. $900,000 and $600,000.

D. $0 and $450,000.

Solution Preview

Year Ended
Dec. 31
2007 2008
Costs incurred $600,000 ...

Solution Summary

The solution using the percentage-of-completion method to report the gross profit.

$2.19