This is added to construction in progress resulting

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$1,000,000. This is added to construction in progress, resulting in an ending balance of $4,000,000. The entity will then compare the balance inconstruction in progress to billings of $3,500,000, with the excess reported as either a current asset or current liabilities. Since construction in progressof $4,000,000 exceeds progress billings of $3,500,000 by $500,000, this amount will be reported as a current asset, entitled something like Costs andprofits in excess of billings.In addition, the $3,500,000 billing created a current receivable, which was reduced by the collections of $3,100,000 resulting in a receivable balance of$400,000. The total related current assets are $500,000 + $400,000 or $900,000.
ReferencesMultiple ChoiceChapter: Chapter 05Learning Objective: 05-09 Demonstrate revenue recognition forlong-term contracts, both at a point in time when the contract iscompleted and over a period of time according to thepercentage completed.Red Co. has a long-term construction contract that qualifies for revenue to be recognized over time. When Red is determining the amount of income torecognize for year two, which of the following items would Red not use in this calculation?
ReferencesMultiple ChoiceChapter: Chapter 05Learning Objective: 05-09 Demonstrate revenue recognition forlong-term contracts, both at a point in time when the contract iscompleted and over a period of time according to thepercentage completed.

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