Sandlewood Construction Inc. recognizes revenue over time according to percentage of completion for its long-term construction contracts. In 2018, Sandlewood began work on a $10,000,000 construction contract, which was completed in 2019. The accounting records disclosed the following data at the end of 2018: Costs incurred $ 5,400,000 Estimated cost to complete 3,600,000 Progress billings 4,100,000 Cash collections 3,200,000 In addition to accounts receivable, what would appear in the 2018 balance sheet related to the construction accounts?

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Business

Gillian Scott

3 June, 19:12

Sandlewood Construction Inc. recognizes revenue over time according to percentage of completion for its long-term construction contracts. In 2018, Sandlewood began work on a $10,000,000 construction contract, which was completed in 2019. The accounting records disclosed the following data at the end of 2018: Costs incurred $ 5,400,000 Estimated cost to complete 3,600,000 Progress billings 4,100,000 Cash collections 3,200,000 In addition to accounts receivable, what would appear in the 2018 balance sheet related to the construction accounts?

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Answers (1)

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Quinn Salas · Answer 1

Current assets - $1,900,000

Explanation:

The computation of the construction account balance is shown below:

= Cost incurred + gross profit - progress billings

where,

Gross profit = Revenue - cost incurred

The revenue = (Cost incurred : total cost) * completion cost

= ($5,400,000 : $9,000,000) * $10,000,000

= $6,000,000

So, the gross profit equal to

= $6,000,000 - $5,400,000

= $600,000

Now put these values to the above formula

So, the value would equal to

= $5,400,000 + $600,000 - $4,100,000

= $6,000,000 - $4,100,000

= $1,900,000 current assets