Group Description

This is an actual study question for the CPA exam. While this is a multiple$-$choice question, I do need the discussion to show the computation on

HOW you reached your answer. How did you calculate the amounts? Please show your work.

On January $1,$ Year $1,$ an entity enters into a contract with a customer to build a robot. The construction of the robot is expected to be completed at

the end of Year $2.$ The entity also determines that

It has no alternative use for the robot.

It has an enforceable right to payment for the performance completed to date.

The progress toward complete construction of the robot is reasonably measurable using the input method based on costs incurred.

The contract price is $$800,000,$ and expected total costs are $$500,000.$ The following additional information relates to the actual and expected costs

incurred:

Year $1$ Year $2$

Costs incurred during each year $$250,000$$$350,000$

Costs expected in future $,$$$250,000$$$,0$

What amounts of revenue, cost of goods sold, and gross profit are recognized by the entity for Year $2?$

A$.$

Revenue Cost of Goods Sold Gross Profit

$$400,000,$$$350,000,$$$50,000$

B$.$

Revenue Cost of Goods Sold Gross Profit

$$400,000,$$$250,000,$$$150,000$

C$.$

Revenue Cost of Goods Sold Gross Profit

$$800,000,$$$350,000,$$$450,000$

D$.$

Revenue Cost of Goods Sold Gross Profit

$$800,000,$$$600,000,$$$200,000$