A construction company has signed $1,000,000 in new contracts. During the current year,
10% of the required work for these contracts was performed. Historically, the controller has
recognized revenue when the contract work was completed using the completed contract
method. This year, the company’s auditors are requiring the new contracts to be recognized
under the percentage of completion method. The change in revenue recognition methods
will result in a revenue change of

Answer (C) is correct.
When the outcome of a transaction involving the rendering of services
(e.g., a construction project) cannot be estimated reliably, revenue must
be recognized only to the extent of the expenses recognized that are
recoverable. If it is probable that the entity will recover the transaction
costs incurred, revenue is recognized only to the extent of those costs that
are expected to be recoverable. Thus, $100,000, 10% of the $1,000,000
contract, should be recognized as revenue compared with $0 of revenue
recognized under the completed contract method, since the contract is not
fully completed.