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26 November, 08:46

Sandlewood Construction Inc. recognizes revenue over time according to percentage of completion for its long-term construction contracts. In 2018, Sandlewood began work on a $10,000,000 construction contract, which was completed in 2019. The accounting records disclosed the following data at the end of 2018: Costs incurred $ 5,400,000 Estimated cost to complete 3,600,000 Progress billings 4,100,000 Cash collections 3,200,000 In addition to accounts receivable, what would appear in the 2018 balance sheet related to the construction accounts?

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  1. 26 November, 09:08
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    Current assets - $1,900,000

    Explanation:

    The computation of the construction account balance is shown below:

    = Cost incurred + gross profit - progress billings

    where,

    Gross profit = Revenue - cost incurred

    The revenue = (Cost incurred : total cost) * completion cost

    = ($5,400,000 : $9,000,000) * $10,000,000

    = $6,000,000

    So, the gross profit equal to

    = $6,000,000 - $5,400,000

    = $600,000

    Now put these values to the above formula

    So, the value would equal to

    = $5,400,000 + $600,000 - $4,100,000

    = $6,000,000 - $4,100,000

    = $1,900,000 current assets
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