Bergeron is a local manufacturer of off-shore drilling platforms. This year, Bergeron entered into a contract to construct a drilling platform, which will be placed in the North Atlantic Ocean. The total contract price is $5,000,000, and Bergeron estimates the total construction cost at $2,000,000. Actual costs incurred this year are $600,000. If Bergeron uses the completed contract method, the
gross profit for this year is
A) $0.
B) $400,000.
C) $600,000.
D) $2,000,000.
A) $0.
Under the completed contract method, revenues and costs are not recognized until the contract is completed.
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