EXERCISE 6–1 2. The Sutton Construction Company entered into a contract in early Year 8 to build a tunnel for the city at a price of $11 million. The company estimated total cost of the project at $10 million and three years to complete.

Actual costs incurred (on budget) and billings to the city are as follows:

Costs Incurred Billings to City Year 8 ............ $2,500,000 $2,000,000 Year 9 ............ 4,000,000 3,500,000 Year 10 .......... 3,500,000 5,500,000 Using the percentage-of-completion method for revenue recognition, what does Sutton Construction report for revenues and profit for Year 9?

Revenues Profit Revenues Profit

a. $4,000,000 $300,000

c. $3,850,000 $350,000

b. $4,400,000 $400,000

d. $3,500,000 $500,000