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

question 11

Multiple Choice

Tullis Construction enters into a long-term fixed price contract to build an office tower for $14,000,000. In the first year of the contract. Tullis incurs $2,000,000 of cost and the engineers determined that the remaining costs to complete are $5,000,000. Tullis billed $4,000,000 in year 1 and collected $3,200,000 by the end of the end of the year. Refer to Tullis Corporation. How much should Tullis report as Accounts Receivable at the end of year 1 on the balance sheet assuming the use of the completed-contract method?

• A) $0
• B) $800,000
• C) $4,000,000
• D) $1,000,000

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Definitions:

Assets

Resources owned by a company that have economic value and can be used to meet its future obligations.

Liabilities

are legal financial debts or obligations that arise during the course of business operations.

Owner's Equity

The residual interest in the assets of a business after deducting liabilities, representing the ownership interest of shareholders or partners.

Liabilities

Financial obligations or debts owed by a business to outsiders, such as loans, accounts payable, or mortgages.