(Answered) Question - brown construction company uses the percentage

Accounting

Question - Brown Construction Company uses the percentage of completion method for long term construction contracts. A specific job was begun in 2011 and completed in 2013. The contract price was $1,400,000 and cost information as of each year end is given below

End of year estimated cost to complete 2011 $400,000 2012 $200,000 2013 $0

Annual cost incurred 2011 $400,000 2012 $400,000 2013 $120,000

Assuming Brown correctly recorded gross profit in 2011, how much gross profit should the company record in 2012?

a- $0

b- $20,000

c- $300,000

d- $320,000

Please explain why each answer is wrong and why the correct one is right.

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