In year 1 a contractor agrees to build a building for $2,500,000 by the end of year 2. The builder's cost is estimated to be $1,800,000. The actual costs year 1 are $900,000 and year 2's actual costs are $1,100,000. Under the percentage of completion method year 2's gross profit is
A) $150,000.
B) $500,000.
C) $700,000.
D) $350,000.
A) $150,000.
(1) Year 1 revenue = 50% × $2,500,000; Year 2 revenue = $2,500,000 - $1,250,000 previously recognized
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