A company entered into a three-year construction project with a total contract price of $10.6 million and an expected total cost of $8.8 million. The following table provides cash flow information relating to the contract:
| All figures in millions | Year 1 | Year 2 | Year 3 |
| Costs incurred and paid | $1.2 | $6.0 | $1.6 |
| Amounts billed and payments received | $2.4 | $5.6 | $2.6 |
If the company uses the percentage-of-completion method, the amount of revenue recognized (in millions) in Year 2 is closest to:
C is correct. The revenue reported is equal to the percentage of the contract that is completed in that period, where percentage completion is based on costs.
In Year 2: (6.0 ÷ 8.8) × 10.6 = 7.2.