Advanced AccountingQuestion 5299 of 305
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2. What is the amount of the profit to be recognized at the end of Year 1?

Options

A` 2.35 crore
B` 44.75 crore
C` 4.75 crore
D` 21 crore
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Correct Answer

✅ Option A — ` 2.35 crore

All Options:

  • A` 2.35 crore ✓
  • B` 44.75 crore
  • C` 4.75 crore
  • D` 21 crore

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Detailed Solution & Explanation

To calculate the profit to be recognized at the end of Year 1:
1. Total contract price = ‘ 160\displaystyle `\,160 crore.
2. Total estimated contract cost at the end of Year 1 = ‘ 150\displaystyle `\,150 crore.
3. Total estimated profit = 160−150=‘ 10\displaystyle 160 - 150 = `\,10 crore.
4. Stage of completion at the end of Year 1 = 23.5%\displaystyle 23.5\%.
5. Profit recognized at the end of Year 1 is:
Profit recognized=23.5%×10 crore=‘ 2.35 crore\text{Profit recognized} = 23.5\% \times 10 \text{ crore} = `\,2.35 \text{ crore}
Hence, **Option A** is the correct answer.

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