• A construction company is hired by the state government on January 1, Year One to build a section of a new highway. The sales price is $100 million and the company estimates that the work will cost $92 million. During Year One, $18 million is spent on the work and the company's engineers believe that work costing $72 million is left to be completed. During Year Two, another $39 million is spent but $38 million of work is now estimated to remain. If the company is applying the percentage of completion method, what is the impact on net income to be recognized in Year Two?
  • $1 million
  • $2 million
  • $3 million
  • $4 million