Homework Answers
Answer: c. ($200,000)
Calculations:
As per conservatism principle, anticipated losses should be recognized as soon as possible.
Therefore, If Total estimated cost is greater than total contract price then the loss should be recognized immediately
For Year 2019:
| Total contract price | $2,500,000 | |
| Less: Total estimated cost | ||
| Cost incurred during the year | $1,500,000 | |
| Estimated costs to complete | $1,200,000 | $2,700,000 |
| Gross profit | ($200,000) |
Thus, Option c is correct and remaining options are incorrect.
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