In year 1, a contractor agrees to build a building for $850,000 by the end of year 2. the builder's cost is estimated to be $400,000. the actual costs for year 1 are $240,000 and year 2's actual costs are $180,000. under the percentage of completion method year 1's gross profit is

Under the percentage of completion method Year 1's gross profit is $270000.

Explanation:

Percentage of completion = Cost incurred upto date / total cost

= $240,000/$400,000

= 60%

Estimated gross profit = Contract price - Estimated cost

                                     = $850,000 - $400,000

                                     = $450000

Year 1 gross profit = $450000*60% = $270000

Therefore, Under the percentage of completion method Year 1's gross profit is $270000.

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explanation:

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