Lake Construction Company has consistently used the percentage-of-completion method of recognizing income. During 2005, Lake entered into a fixed-price contract to construct an office building for $10,000,000. Information relating to the contract is as follows:
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At December 31, |
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2005 |
2006 |
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Percentage of completion |
20 |
% |
60 |
% |
|
Estimated total cost at completion |
$7,500,000 |
$8,000,000 |
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|
Income recognized (cumulative) |
500,000 |
1,200,000 |
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Contract costs incurred during 2006 were
- $3,200,000
- $3,300,000
- $3,500,000
- $4,800,000