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 1 | Year 2 | Year 3 | Total | |
| Billed | $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（ ）。
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.