(Long-Term Contract Pricing) The Children’s Hospital has hired Fared Construction as the contractor to build the new cancer wing for the hospital. The project, earning Fared Construction $52,000,000 in revenues, is expected to extend over four years and cost $47,500,000. At the end of Year 1, Fared Construction has spent the following on construction:
|
Materials |
$ 6,500,000 |
|
Labour |
3,600,000 |
|
Overhead |
2,800,000 |
|
Total |
12,900,000 |
A progress payment of $15,000,000 was paid to Fared Construction at the end of Year 1.
How much will Fared Construction report on their income tax for Year 1, using the percentage of completion method?