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Answer :
Final Answer:
150, 126, 184, 225 are the costs incurred during year b for a 3 year contract with a price of 500, and what are the estimated costs to complete year 1, year 2, and year 3, with a profit/loss recognized over time. The correct answer is option 3: 150, 126, 184, 225.
Explanation:
The costs incurred during year b for a 3-year contract with a price of 500 are as follows: Year 1: 150, Year 2: 126, Year 3: 184, and the remaining balance for Year 3 is 225.
In option 3, the costs gradually decrease over the years, reflecting a more accurate estimation of expenditure over the contract period. This approach ensures a smoother cash flow distribution and better profit/loss recognition over time.
The costs incurred during the contract period need to be distributed accurately to understand the financial implications. Option 3 presents a logical progression of costs, with a decrease from Year 1 to Year 2, followed by a slight increase in Year 3. This distribution aligns with typical project expenditure patterns, where initial costs may be higher due to setup and implementation, followed by reduced expenses as the project stabilizes.
The increase in Year 3 could be attributed to maintenance or completion costs. Recognizing profit or loss over time rather than upfront allows for a more realistic representation of financial performance, ensuring that the impact of expenditure is appropriately reflected in each period's financial statements. This approach facilitates better financial planning and decision-making, enabling stakeholders to assess the project's profitability accurately.
Overall, option 3 provides a balanced and realistic estimation of costs and profit/loss recognition over the contract period, enhancing the financial transparency and reliability of the analysis.
The correct answer is option 3: 150, 126, 184, 225.
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