Cooper Construction Company had a contract starting April 2021, to construct a $24,000,000 building that is expected to be completed in September 2023, at an estimated cost of $22,000,000. At the end of 2021, the costs to date were $10,120,000 and the estimated total costs to complete had not changed. The progress billings during 2021 were $4,800,000 and the cash collected during 2021 was 3,200,000. Cooper uses the percentage-of-completion method.
For the year ended December 31, 2021, Cooper would recognize gross profit on the building of:
a) $843,333
b) $920,000
c) $1,080,000
d) $0

b) $920,000

Explanation:

Under Completed contract method,the revenue is recognized only when the contract is 100% complete.

As the contract is not completed in 2021 , the profit is recognized only in the year of completion

If in case question is asked about % of completion answer should be as fallows:

Total gross profit on the contract = total contract value – total estimated cost

                                                                = 24,000,000 -22,000,000  

                                                               = 2,000,000

Total cost in 2021 = 10,120,000

Total % of completion in 2021 = total cost in 2021/ total cost of contract

                                                                = 10,120,000/22,000,000

                                                               = 46%  

Gross profit in 2021 = total gross profit on contract x Total % of completion in 2015

                                               = 2,000,000 x 46%

                                               = $920,000