A Construction Company Uses the Percentage-Of-Completion Method for Long-Term Construction

A construction company uses the percentage-of-completion method for long-term construction contracts. A particular job was begun in 2006 and completed 2008. During 2007, it appeared that the project would cost 25 percent more than originally expected. Data at each year-end are given below: $\begin{array} { | l | l | l | l | } \hline & 2006 & 2007 & 2008 \\\hline \text { End of year estimated cost remaining } & \$ 200,000 & \$ 100,000 & \$ - 0 - \\\hline \text { Annual cost incurred } & 200,000 & 200,000 & 60,000 \\\hline\end{array}$ The contract price was $700,000. Assuming the company properly recorded income in 2006, how much income should be recorded in 2007?

A) $10,000
B) $42,000
C) $160,000
D) $192,000

Correct Answer:

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