Question

A company began work in 2020 on a contract for $7,700. Other data are as follows:...

A company began work in 2020 on a contract for $7,700. Other data are as follows:

2020 2021
Costs incurred to date $3,000 $5,600
Estimated Costs to complete 2,000 ----------
Billings to date 3,700 7,700
Collections to date 1,000 4,800

On the company’s balance sheet at December 31, 2020, under the percentage-of-completion method, an inventory (or current liability) of $_____________ will be reported related to this project.

Homework Answers

Answer #1

Solution:

Cost incurred till date $ 3,000
Total Estimated cost $ 5,000 =3000+2000
% Completion 60% =3000/5000
Contract price $ 7,700
Revenue to be recognized for 2020 $ 4,620 =7700*60%
Billings to date $ 3,700

On the company’s balance sheet at December 31, 2020, under the percentage-of-completion method,

an inventory of $ 920 ( 4,620 - 3,700 ) will be reported related to this project.

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