Long-term contract; revenue recognition over time; balance sheet
Response to the following :
Refer to the situation described in problem 1. During the first year the company billed its customer $7 million, of which $5 million was collected before year-end. What would appear in the year-end balance sheet related to this contract?
Problem. 1:
Long-term contract; revenue recognition over time; profit recognition
A construction company entered into a fixed-price contract to build an office building for $20 million. Construction costs incurred during the first year were $6 million and estimated costs to complete at the end of the year were $9 million. The company recognizes revenue over time according to percentage of completion. How much revenue and gross profit or loss will appear in the company's income statement in the first year of the contract?