Question

[The following information applies to the questions displayed below.]

Answer 1

Answer:

Year 1

3,100,000 - 2,604,000 = 496,000 gross profit

Year 2

3,900,000 - 4,032,000

Explanation:

The percentage of completion will be matched with the amount of revenue recognized

Year 1

2,604,000 / (2,604,000 + 5,796,000)

= 0.31

Earned revenue

10,000,000 × 0.31 = 3,100,000

Year 2

4,032,000 / (4,032,000 + 1,764,000)

= 0.6956521739

Earned revenue

(10,000,000 × 0.70) - 3,100,000

3,900,000

Year 3.

Here, the entire revenue that is missing will be recognized.

10,000,000 - 3,100,000 - 3,900,000

3,000,000