For a Construction Firm Using the Completed-Contract Method,if Costs Exceed

question 9

Multiple Choice

For a construction firm using the completed-contract method,if costs exceed billings on some contracts by $1,000,000 and billings exceed costs by $800,000 on others,the contracts should ordinarily be reported as a

• A) current asset of $200,000.
• B) current liability of $200,000.
• C) current asset of $1,000,000 less a contra-current asset of $800,000.
• D) current asset of $1,000,000 and a current liability of $800,000.

Recognize the requirements and tax implications of forming a corporation, including the tax-free exchange provision.

Acquire knowledge about the specific tax forms and schedules relevant to corporate taxation.

Understand the key concepts of Adjusted Gross Income calculations and tax implications for corporations.

Comprehend the purpose and function of Schedule M-1 in reconciling taxable income to book income.

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Definitions:

Accrual Liabilities

Obligations that a company has incurred, for which invoices have not yet been received or payment has not been made.

Accounts Payable

Money owed by a business to its suppliers or creditors for goods and services received but not yet paid for.

Revolving Credit Agreement

A credit arrangement that allows a company or individual to borrow, repay, and borrow again up to a certain credit limit.

Commitment Fee

A fee charged by a bank for guaranteeing to have loanable funds available. The fee is charged on un borrowed amounts up to the maximum of the guarantee. See Revolving credit agreement.