Early in 2021, Forest Ltd At the End of 2021, the Status of the Work

Early in 2021, Forest Ltd. signed a contract to construct a warehouse. Forest's management estimated the gross profit on the contract to be $740,000, as indicated by the following: $$\begin{array} { l | l | } \hline \text { Contract price } & \$ 3,500,000 \\\hline \text { Estimated costs } & 2,760,000 \\\hline \text { Estimated gross profit } & \$ 740,000 \\\hline\end{array}$$ At the end of 2021, the status of the work on the contract was as follows:
$$\begin{array} { | l | c | } \hline \text { Costs incurred to date } & \$ 1,350,000 \\\hline \text { Estimated costs to complete } & 1,650,000 \\\hline\end{array}$$ How much revenue can be recognized on this contract for 2021, assuming that Forest uses the
Percentage of completion basis for long-term construction contracts (round to nearest dollar) ?

A) $333,000
B) $863,333
C) $1,575,000
D) $1,711,957

Correct Answer:

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