Hayes Construction Corporation contracted to construct a building for $3,000,000. Construction began in 2012 and was completed in 2013. Data relating to the contract are summarized below:
Year ended
December 31,
2012 2013
Costs incurred $1,200,000 $900,000
Estimated costs to complete 800,000 -
Hayes uses the percentage-of-completion method as the basis for income recognition. For the years ended December 31, 2012, and 2013, respectively, Hayes should report gross profit of
a. $540,000 and $360,000.
b. $1,800,000 and $1,200,000.
c. $600,000 and $300,000.
d. $0 and $900,000.