Lake Construction Co. uses the percentage of completion method for long-term construction contracts. The

company has a project with a contract price of P7,000,000, on which P600,000 of gross profit has been

recognized in prior years. Information for the current year is as follows:

Total cost incurred through current year

P5,000,000

Estimated cost remaining at the end of the current year

2,800,000

What is the loss that Lake should recognize in the current year?

a.

600,000

b.

800,000

c. 1,400,000

d. 0