Tyco Ltd Entered into a Contract to Build a Sports

question 56

Multiple Choice

Tyco Ltd entered into a contract to build a sports arena for $1,800,000. Construction commenced on August 1, 2020, with a planned completion date of December 31, 2022. A summary of the related accounting information is provided below: $$\begin{array} { | l | r | r | r | } \hline & \mathbf { 2 0 2 0 } & \mathbf { 2 0 2 1 } & \mathbf { 2 0 2 2 } \\\hline \text { Costs incurred during the year } & 400,000 & 500,000 & 650,000 \\\hline \text { Estimated costs to complete at year end } & 1,200,000 & 600,000 & 0 \\\hline \text { Billings during the year } & 560,000 & 640,000 & 700,000 \\\hline \text { Cash collections during the year } & 500,000 & 310,000 & 990,000 \\\hline\end{array}$$ How much would the balance in accounts receivable be on the balance sheet of Tyco at the end of 2020 if Tyco uses the percentage of completion method?

• A)$110,000
• B)$60,000
• C)$500,000
• D)$660,000

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Definitions:

Reneging

The act of going back on a promise, obligation, or deal.

Probability

An indicator of how likely it is that an event will happen, represented as a number ranging from 0 to 1.

System

A set of interrelated components that work together to achieve a common goal or perform a specific function.

Average Number

The arithmetic mean or central value of a set of numbers, calculated by dividing the sum of the values in the set by the number of values.