CFA Practice Question

CFA Practice Question

A company has undertaken a construction contract for $6,700,000, spread over three years with a projected gross profit of 40%. In the second year, the firm will book the following revenue and cost on the basis of the completed contract method:
A. revenues of $2,233,333 and costs of $1,340,000
B. revenues of $0 and costs of $1,340,000
C. revenues of $0 and costs of $0
Explanation: Under the completed contract method, no costs or revenues are recognized until the project is completed. In this case, no revenue or cost will be recognized in the first or the second year.

User Contributed Comments 4

User Comment
pjdeschenes A. would be correct for Percent Completed method if equal progress was made in each year. A. would be correct for Installment method if the company was paid in equal installments for each year.
Rchan89 would B be correct for any method?
zeen1 nope
oneashok cost is always matched with revenue, so B cant be answer to any question...
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