Question: 1. ABC expends $500,000 for work performed under a contract with a total contract price of $3 million and estimated costs of $2.5 million. It

1. ABC expends $500,000 for work performed under a contract with a total contract price of $3 million and estimated costs of $2.5 million. It sends a bill to the customer for $400,000 under the terms of the contract.

a. How much revenue and gross profit should the company recognize in the income statement?

b. How is the $400,000 billing reported on the balance sheet?

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