Nova Construction Company (NCC)entered into a Contract to Build a School

Nova Construction Company (NCC) entered into a contract to build a school for $1,800,000. Construction commenced on May 1, 2020, with a planned completion date of December 31, 2022. A summary of the related accounting information is provided below: $$\begin{array} { | l | r | r | r | } \hline & \mathbf { 2 0 2 0 } & \mathbf { 2 0 2 1 } & \mathbf { 2 0 2 2 } \\\hline \text { Costs incurred during the year } & 400,000 & 500,000 & 650,000 \\\hline \text { Estimated costs to complete at year end } & 1,200,000 & 600,000 & 0 \\\hline \text { Billings during the year } & 560,000 & 640,000 & 600,000 \\\hline \text { Cash collections during the year } & 500,000 & 310,000 & 990,000 \\\hline\end{array}$$ How much gross profit would be recognized in fiscal 2020 if NCC uses the percentage of completion method?

A) $50,000
B) $100,000
C) $130,000
D) $180,000

Correct Answer:

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