Question
Builders Inc. entered into a contract to build a state-of-the-art warehouse for Smith and Company for $18,000,000. Midway through the project, a dispute arose. The
Builders Inc. entered into a contract to build a state-of-the-art warehouse for Smith and Company for $18,000,000. Midway through the project, a dispute arose. The dispute has not delayed the project; however, the dispute could affect the overall cost by $100,000. Builders uses the percentage-of-completion method to account for its long-term contracts. How should Builders handle the dispute?
a.
Reduce income in the year the project is completed.
b.
Reduce income in the year the dispute arose
c.
Revise its estimates and base all subsequent income determinations on the new estimates.
d.
Revise its estimates, recomputed previous years
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