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Jones signs a three-year contract to construct a new office building for Smith. The contract price is $3 million and estimated cost $2 million. For
Jones signs a three-year contract to construct a new office building for Smith. The contract price is $3 million and estimated cost $2 million. For year one, Jones recognizes $1 million of revenue and $800,000 of cost. During year 2. Jones incurs $12 million in cost and estimates that during year 3 an additional $1.1 million will be necessary to complete the project. For year 2. Jones will recognize a loss of: Click the answer you think is right. $100,000 $0 $300,000 $200.000 How to get 900,000 revenue to go against 1,200,000 to get 300,000 loss? I know the answer is 300,000 but I am not seeing the transitions. My thought was that it is given that a loss will be evident in year 2 just needs to know how much. My only thought was to add the cost of 12 million to the estimated for year 3 of 1.1 million which is 300,000 more cost than the 2 million estimated at contract origination. Is this a for sure path for this type of question. How do I derive a 900,000 revenue for year 2
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