Gleason Construction Enters into a Long-Term Fixed Price Contract to Build

Gleason Construction enters into a long-term fixed price contract to build an office building for $30,000,000. In the first year of the contract Gleason incurs $8,000,000 of cost and the engineers determined that the remaining costs to complete are $18,000,000. How much gross profit or loss should Gleason recognize in Year 1 assuming the use of the completed-contract method?

A) $4,000,000 loss
B) $2,000,000 profit
C) $0 profit
D) $266,667 loss

Correct Answer:

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