Final answer:
The gross profit for Omega Construction in 2014 calculated using the percentage-of-completion method is $102,000, which doesn't match any of the provided options. There might be an error in either the calculation or the options provided.
Step-by-step explanation:
Under the percentage-of-completion method of revenue recognition, the gross profit for Omega Construction in 2014 is calculated based on the percentage of the project that has been completed that year. To find this percentage, we divide the costs incurred during the year by the total estimated costs. The costs incurred in 2014 are $238,000, and the total estimated costs at the beginning were $595,000.
The percentage of completion for 2014 is therefore:
Percentage of Completion = $238,000 / $595,000 ≈ 0.40 or 40%
The revenue recognized for 2014 is then:
Revenue Recognized = Total Contract Price * Percentage of Completion
= $850,000 * 0.40
= $340,000
Now, we calculate the amount of gross profit:
Gross Profit = Revenue Recognized - Costs Incurred
= $340,000 - $238,000
= $102,000
However, the gross profit will be proportionately divided based on the estimated total profit from the project and the costs incurred. Using the original contract price of $850,000 and the total estimated costs of $595,000, the estimated total profit is:
Estimated Total Profit = Contract Price - Total Estimated Costs
= $850,000 - $595,000
= $255,000
Thus, the gross profit recognized in 2014 is:
Gross Profit Recognized in 2014 = Estimated Total Profit * Percentage of Completion
= $255,000 * 0.40
= $102,000
This answer does not correspond to any of the options provided (A) $10,000, (B) $20,000, (C) $30,000, (D) $40,000. There seems to be a mistake as the calculated gross profit based on the information provided is $102,000. Please ensure that all cost and revenue figures are correct and that the provided options are accurate.