Camey Construction Enters into a Long-Term Fixed Price Contract to Build

question 100

Multiple Choice

Camey Construction enters into a long-term fixed price contract to build an office building for $6,000,000. In the first year of the contract Camey incurs $1,400,000 of cost and the engineers determined that the remaining costs to complete are $2,200,000. Camey billed $3,800,000 and collected $1,000,000 in Year 1. Refer to Camey Construction. How should Camey report Construction in Progress and Billings on Construction in Progress at the end of year 1 on the balance sheet assuming the use of the percentage-of-completion method? (Do not round intermediary calculations, and round your final answer to the nearest whole dollar.)

• A) asset of $0
• B) liability of $1,466,667
• C) asset of $1,400,000
• D) liability of $3,800,000

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Definitions:

Interperiod Tax Allocation

The process of allocating income taxes over different accounting periods due to temporary differences between financial accounting and tax reporting.

Intraperiod Tax Allocation

The process of allocating income taxes between different parts of the financial statements within the same fiscal period.

FASB Statement No.109

A standard issued by the Financial Accounting Standards Board relating to income tax accounting.

Installment Method

A revenue recognition method that allows income to be realized at the point of sale and subsequently as payments are received.