Question

In 2021, Long Construction Corporation began construction work under a three-year contract. The contract price is $1,600,000. Long recognizes revenue over time according to percentage of completion for financial reporting purposes. The financial statement presentation relating to this contract at December 31, 2021, is as follows: Balance Sheet Accounts receivable (from construction progress billings) $ 30,000 Construction in progress $ 100,000 Less: Billings on construction contract (94,000 ) Cost and profit of uncompleted contracts in excess of billings 6,000 Income Statement Income (before tax) on the contract recognized in 2021 $ 20,000 Required: 1. What was the cost of construction actually incurred in 2021

Answer 1

Answer:

$80,000

Explanation:

We can find out the cost of construction actually incurred in 2021 by adding the construction in progress with income before the tax on the contract recognized in 2021

Cost of construction actually incurred = construction in progress + income before the tax on the contract recognized in 2021

Cost of construction actually incurred = $100,000 - $20,000

Cost of construction actually incurred = $80,000