Question
Swallow Corp. has a contract to construct a $5,000,000 cruise ship at an estimated cost of $4,000,000. The company will begin construction of the cruise
Swallow Corp. has a contract to construct a $5,000,000 cruise ship at an estimated cost of $4,000,000. The company will begin construction of the cruise ship in early January 2011 and expects to complete the project sometime in late 2014. Swallow Corp. has never constructed a cruise ship before, and the customer has never operated a cruise ship. Due to this and other circumstances, Swallow Corp. believes there are inherent hazards in the contract beyond the normal, recurring business risks. Swallow Corp. expects to recover all its costs under the contract. During 2011 and 2012, the company has the following activity:
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For the year ended December 31, 2012, how much revenue should Swallow Corp. recognize on its income statement?
- $980,000.
- $2,040,000.
- $1,300,000.
- $1,060,000.
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