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- Topic: Balance sheet for Completed Contract method
| Author | Topic: Balance sheet for Completed Contract method |
|---|---|
| neutro @2010-06-13 05:19:26 |
ABC Consulting enters into a long-term contract on Jan 1 2000 where it will be paid $200 at the end of contract. Contract is expected to take 2 years (end date Dec 31 2001). It incurs a cost of $60 in 2000 and $80 in 2001. 1. What would be the balance sheet of ABC on Dec 31 2000? 2. Would your answer be the same if you knew the $60 cost is for raw materials? 3. Would your answer be the same if you knew the $60 cost is for wages? Note: ABC uses completed contract method of accounting. |
| jonggyun @2010-07-07 10:18:08 |
1. What would be the balance sheet of ABC on Dec 31 2000? Expenses of $60 so cash will be lower in 2000. But no revenue. Since it is completed contract. 2. Would your answer be the same if you knew the $60 cost is for raw materials? Does not matter. The current assts will still go down. Instead of cash you will reduce inventory 3. Would your answer be the same if you knew the $60 cost is for wages? Well Cash would go down and the $60 is an expense in the income statement. NO INCOME since this is a completed contract method |
CFA Discussion Topic: Balance sheet for Completed Contract method
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