Question
1. Heyward Construction Company signs an agreement with the state of Maine to build a short stretch of highway for $42 million. During Year One,
1. Heyward Construction Company signs an agreement with the state of Maine to build a short stretch of highway for $42 million. During Year One, $8 million is spent and company officials anticipate that another $24 million will be needed to complete the work. During Year Two, another $13 million is spent and current information indicates that another $14 million will be required to finish the project. The estimations are all viewed as reasonable and officials feel that the company is capable of finishing the work. What amount of profit should the company recognize in Year Two? a. Zero b. $1,700,000 c. $2,166,667 d. $2,600,000
2. In Year One, the Atonlini Corporation begins to sell specific inventory items with a four-month right of return. Any merchandise can be returned at that time if the buyer has been unable to resale it to a third party. On December 1, Year One, goods costing $40,000 are sold to customers for a total of $50,000. Company officials expect 20 percent of this merchandise to be returned (unharmed) at the end of March in Year Two. In connection with this transaction, what amount of profit should Atonlini recognize in Year One?
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