Question

Island Builders, Inc., has consistently used the percentage-of-completion method of accounting for construction type contracts. During 2004 Island Builders started work on a $9,000,000 fixed-price construction contract that was completed in 2006, Island Builders’ accounting record disclosed the following:
December 31
2004 2005
Cumulative contract costs incurred $3,900,000 $6,300,000
Estimated total costs at completion 7,800,000 8,100,000

How much of income would Island Builders Inc. have recognized for the year ended December 31, 2005?
a. $100,000
b. $300,000
c. $600,000
d. $700,000

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