Nigella Company has a 3-year contract to build a manufacturing plant for $ 2500. They have a reliable estimate that costs will be $ 2000 over the life of the contract. The project has the following year-end billing amounts, cash received and costs incurred: Year 1Year 2Year 3TotalBilled $1000$1000$500 $2500 Cash received 700 1200 600 2500 Costs incurred 700 900 400 2000 Under the completed contract method of revenue recognition, the total liabilities associated with this project at the end of year 2 for Nigella will be:（）
A. $100.
B. $300.
C. $400.
参考答案：C
解析：
The liabilities are simply advance billings minus costs incurred under the completed-contract method. The net liability at the end of year 1 is $300 ($1000-$700) and at the end of year 2 it grows by an additional $100 ( $1000-$ 900). The firm has billed $ 2000 at the end of year 2 and has incurred $1600 of costs so the net liability at the end of year 2 is $400.