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

Question

Quizplus · Accepted Answer

Under the completed-contract method, revenue and costs are recognized only when the contract is completed. However, accounts receivable is based on the amount billed minus the amount collected. Tullis billed $4,000,000 and collected $3,200,000, so the accounts receivable is $800,000.

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