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During 2020 the Tonka Corp. began construction for which it will invoice a total of $...

During 2020 the Tonka Corp. began construction for which it will invoice a total of $ 600,000. The project ended on December 15, 2021. Additional information related to this project is presented below:

 

2020

2021

Costs incurred in the period

$ 225,000

$ 255,000

Estimated costs to complete the project

225,000

-0-

Customer billing

240,000

360,000

Cash Received from Clients

200,000

400,000

Assuming Tonka uses the CONTRACT COMPLETED method, what will be the gross profit reported in the 2020 Statement of Income and Expenses related to this project?
Select one:
a. $ 75,000
b. $ 345,000
c. $ 0
d. $ 120,000
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Answer #1

Tonka uses the CONTRACT COMPLETED method, the gross profit will be reported in the 2020 Statement of Income

and Expenses related to this project will be $ 0 because under completed contract method, Revenue is recognized in

the year of completion only & gross profit will be reported at the same time.
Correct answer is option C .
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