12. Beaver Co., a construction firm, enters into a contract to buila a dam for a customer. The contract price is total construction costs plus 20% thereof. However, the variable fee increases to 25% if the project is completed within three years. Beaver Co. incurs the following costs: 20x1 20x2 20x3 Costs incurred each year 10,500,000 14,300,000 6,000,000 Estimated costs to complete 19,500,000 6,200,000 In 20x1, it is not highly probable that the additional fee will be received. However, after a change in circumstances in 20x2, it is now highly probable that the additional fee will be received. Beaver Co. uses the percentage of completion method based on costs. How much profit is recognized in 20x3? c. 1,200,000 d. 1,500,000 a. 850,000 b. 980,000

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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12. Beaver Co., a construction firm, enters into a contract to buila
a dam for a customer. The contract price is total construction
costs plus 20% thereof. However, the variable fee increases to
25% if the project is completed within three years. Beaver Co.
incurs the following costs:
20x1
20x2
20x3
Costs incurred each year
10,500,000
14,300,000
6,000,000
Estimated costs to complete 19,500,000
6,200,000
In 20x1, it is not highly probable that the additional fee will be
received. However, after a change in circumstances in 20x2, it is
now highly probable that the additional fee will be received.
Beaver Co. uses the percentage of completion method based on
costs. How much profit is recognized in 20x3?
a. 850,000
b. 980,000
c. 1,200,000
d. 1,500,000
Transcribed Image Text:12. Beaver Co., a construction firm, enters into a contract to buila a dam for a customer. The contract price is total construction costs plus 20% thereof. However, the variable fee increases to 25% if the project is completed within three years. Beaver Co. incurs the following costs: 20x1 20x2 20x3 Costs incurred each year 10,500,000 14,300,000 6,000,000 Estimated costs to complete 19,500,000 6,200,000 In 20x1, it is not highly probable that the additional fee will be received. However, after a change in circumstances in 20x2, it is now highly probable that the additional fee will be received. Beaver Co. uses the percentage of completion method based on costs. How much profit is recognized in 20x3? a. 850,000 b. 980,000 c. 1,200,000 d. 1,500,000
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