Question

Alan Construction Corp. entered into a contract to install a solar system for a fixed price of $1,500,000. Alan Construction Corp. recognizes revenue upon contract completion.

Cost incurred Estimated Cost to Complete
2015 $200,000 $1,000,000
2016 900,000 600,000
2017 500,000

In 2016, Alan Contruction Corp would report (rounded to the nearest thousand) gross profit (loss) of:

Answer 1

In 2016, Alan Construction Corp would report a gross profit of $100,000.

Step-by-step explanation:

In 2016, Alan Construction Corp would report a gross profit of $100,000 (rounded to the nearest thousand). To calculate the gross profit, we need to subtract the cost incurred from the estimated cost to complete in 2016. The cost incurred in 2016 is $900,000, and the estimated cost to complete in 2016 is $600,000. Subtracting the cost incurred from the estimated cost to complete gives us $900,000 - $600,000 = $300,000. Rounding this to the nearest thousand gives us a gross profit of $100,000.