Early in 2012, Forest Ltd. signed a contract to construct a warehouse. Forest's management estimated the gross profit on the contract to be $740,000, as indicated by the following:

Contract price

$3,500,000

Estimated costs

2,760,000

Estimated gross profit

$740,000

At the end of 2012, the status of the work on the contract was as follows:

Costs incurred to date

$1,350,000

Estimated costs to complete

1,650,000

How much revenue can be recognized on this contract for 2012, assuming that Forest uses the

percentage of completion basis for long-term construction contracts (round to nearest dollar)?

A) $333,000

B) $863,333

C) $1,575,000

D) $1,711,957