Under the percentage-of-completion method, how should the balances of progress billings and construction in process be disclosed in the financial statements prior to the completion of the contract?
A) progress billings as deferred income, construction in progress as a deferred expense
B) progress billings as income, construction in process as inventory
C) net, as a current asset if a debit balance, and a current liability if a credit balance
D) net, as income from construction if a credit balance, and loss from construction if a debit balance

Question

Quizplus · Accepted Answer

Under the percentage-of-completion method, progress billings represent amounts billed to customers for work done so far. It is recorded as a current liability until the project is completed. Construction in process represents the costs incurred and the Billings on Construction in Progress account shows the amounts that have been billed to the customer. The net balance of progress billings and construction in process is recorded on the balance sheet as a current asset or current liability depending on whether it is a debit or credit balance. Hence, choice C is the most appropriate.

Under the Percentage-Of-Completion Method, How Should the Balances of Progress