Southtel is a builder of large digital networks. In the midst of the high-tech euphoria, the company bid and won a $48,000,000 contract to build a network for the country of Elbonia. Details on the project over the last three years are as follows:

\begin{array} { | l | l | l | l | } \hline & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } \\\hline \text { Cumulative costs incurred } & 16,500 & 36,000 & 54,000 \\\hline \text { Additional costs to complete as estimated at } & & & \\\text { year end } & 49,500 & 12,000 & 0 \\\hline \text { Amounts invoiced to customer in the year } & 13,500 & 26,000 & 21,000 \\\hline \text { Cash collected in the year from the customer } & 10,500 & 25,000 & 12,500 \\\hline\end{array}

Required:
Calculate the amount of revenue, cost of goods sold (COGS), and gross profit (or loss)to be recognized in each of the three years. The company uses the percentage of completion method to account for long-term contracts. Record your answer in the following table.

\begin{array} { | l | r | r | r | r | } \hline & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Total } \\\hline \text { Revenue } & & & & 48,000 \\\hline \text { Less: Cost of goods sold } & 16,500 & & & 54,000 \\\hline \text { Less: Expected loss (recovery) } & & ( 13,500 ) & & 0 \\\hline \text { Gross profit (loss) } & & & & ( 6,000 ) \\\hline\end{array}

Which Statement About the Percentage of Completion Method Is Correct

Multiple Choice

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