Completed-contract method of accounting


Please assist in answering the following problem.

Problem: Ramos, Inc. began work in 2008 on contract #3814, which provided for a contract price of $7,200,000. Other details follow:

                                                                                 2008            2009
Costs Incurred During the Year                               $1,200,000    $3,675,000
Estimated Costs To Complete, As of December 31      3,600,000            0
Billings During the Year                                           $1,350,000    $5,400,000
Collections During the Year                                        $900,000    $5,850,000

Assume that Ramos uses the completed-contract method of accounting. The portion of the total gross profit to be recognized as income in 2009 is

Choose one answer.

a. $900,000
b. $1,350,000
c. $2,325,000
d. $7,200,000

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Business Law and Ethics: Completed-contract method of accounting
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