Sonex Construction Co. incurred the following costs and made the following estimates in the first two years of a three-yearconstruction project.Year 1Year2Actual current year costs incurred$1,200,000$1,000,000Estimated costs to complete contract1,800,000550,000Contract price5,000,0005,000,000Billings and collections2,500,0001,500,000Using the percentage of completion method of accounting, what amount would Sonex show as either a net current asset or a netcurrent liability as of the end of Year 2 due to its construction activity?Multiple Choice$4,000,000 assetО$1,800,000 assetО$1,500,000 liability.

Percentage of completion method is method of recognising revenue for the year based on percentage…

Using the percentage of completion method of accounting, what amount would Sonex show as either a net current asset or a net current liability as of the end of Year 2 due to its construction activity?

Using the percentage of completion method of accounting, what amount would Sonex show as either a net current asset or a net current liability as of the end of Year 2 due to its construction activity?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: C. Our Funding (cont'd) C6. Net Interest Expense Accounting policies Finance income is recognised in…

Q: Demonstrate revenue recognition for long-term contracts, both at a point intime when the contract is…

A: Long term contracts usually qualify for revenue recognition over time. We recognise revenue over…

Q: Changes in the estimates for residual value or useful life result in changes in the depreciation…

A: Lets understand the basics.Accounting policies are set of principle, rules which are followed for…

Q: which of the following statements is not correct? 1) generally accepted accounting principles…

A: The salvage value of an asset is the expected book value of the item after all depreciation has been…

Q: What is the correct process for determining depreciation expense for partial periods? A: The…

A: Lets understand the basics. Depreciation is a reduction in value of asset due to wear and tear,…

Q: A change in depreciation method is to be accounted for in the current year and future years going…

A: A change in depreciation method involves altering how an asset's value is systematically reduced…

Q: How should an expenditure for an ordinary repair to factory equipment be re accumulated…

A: The expense of keeping and restoring an item, often machinery, equipment, or property, to its normal…

Q: The depreciation method in which the depreciable cost of an asset is apportioned equally over its…

A: The depreciation is a decline in the value of tangible assets over their useful life. it is a…

Q: GAAP regulations state that for each of the types of plant assets, a company must disclose the…

A: The Generally Accepted Accounting Principles (GAAP) are a set of rules, standards, and practices…

Q: Z Your answer is partially correct. Try again. Using the completed-contract method, calculate the…

A: Contract costing: Contract costing is that form of specific order costing that applies where work is…

Q: The value of "Property, Plant, & Equipment, net" reported on the balance sheet represents: A) The…

A: Fixed assets are an unavoidable component of every business organization. These assets are useful in…

Q: Which of the following is NOT correct? i. Initial allowance is claimable in the year the qualifying…

A: Capital allowances and depreciation appear to be two tax-deduction techniques that businesses can…

Q: Some intangible assets that companies may report on their balance sheets include patents,…

A: Amortization is the process of gradually writing off the initial cost of an intangible asset over a…

Q: Describe the three different methods used to calculate the periodic depreciation allowances for…

Q: If a company chooses the revaluation model permitted in IAS 16 for measuring non-current assets,…

A: Non-current assets, also known as long-term assets or fixed assets, are resources that a company…

Q: how much is the accumulated depreciation using the unites of output (miles driven) method at the end…

A: To calculate the accumulated depreciation using the units of output method, also known as the units…

Q: David Mendez Under the percentage-of-completion method, how should the balances of progress billings…

A: Progress Billings as income: Progress billings represent amounts billed to customers for work…

Q: A plant asset's book value equals its estimated salvage value: A. On the date of the asset's…

A: Depreciation on a depreciable asset is computed after considering its salvage value so that at the…

Q: Annuel maintenance costs related to its machinery, $71,400 would be an expense in the period occured…

A: Correct Answer: Annual maintenance costs related to its machinery, $71,400 would be accounted for…

Q: The step in setting working capital balances, "set the permanent current asset balances" involves:

A: Working capital is a financial metric that represents the difference between a company's current…

Q: Long term liabilities are usually associated with -purchase of a building -purchase of equipment…

A: Long term liabilities: These include all the obligations and debts that the company owes for a…

Q: years

A: Depreciation is an accounting method of allocating the cost of a tangible or physical asset over its…

Question

Sonex Construction Co. incurred the following costs and made the following estimates in the first two years of a three-year
construction project.
Year 1
Year2
Actual current year costs incurred
$1,200,000
$1,000,000
Estimated costs to complete contract
1,800,000
550,000
Contract price
5,000,000
5,000,000
Billings and collections
2,500,000
1,500,000
Using the percentage of completion method of accounting, what amount would Sonex show as either a net current asset or a net
current liability as of the end of Year 2 due to its construction activity?
Multiple Choice
$4,000,000 asset
О
$1,800,000 asset
О
$1,500,000 liability.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: What is percentage of completion method?

VIEW

Step 2: Formulas and explanation of it.

VIEW

Step 3: Calculation for deciding current liabilities or current asset

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Nn. 122.
Which depreciation method would result in the same depreciation expense amount regardless of the partial period cor Select one: a. Sum-of-the-years'-digits b. Declining-balance c. Units-of-production d. Straight-line
On the balance sheet, accumulated depreciation is:   Group of answer choices subtracted from property and equipment. added to total liabilities. added to property and equipment. subtracted from total liabilities.
For the month of June 2023, patient charges at Southfield Hospital (a not-for-profit hospital) were $2,940,000. Third-party payers were billed $1,900,000. The hospital estimated that contractual adjustments would reduce the amount collected from their-party payers to $1,790,000. Prepare the neccessary journal entry to record the contractual adjustments.
Choose the appropriate definition for each term. Term Long-lived assets Capitalization of cost Units-of-production method Definition Assets that will be used for more than a year. How expenses are reported in the income statement. A depreciation method that produces higher amounts of depreciation expense in the early years of an asset's life and lower amounts in the later years. Carrying value Asset impairment loss Depreciation
How would accumulated depreciation be classified on the balance sheet? current asset fixed asset current liability O long term liability
Which of the following would be an example of a "transactional" adjustment made to a comparable sale? An adjustment for below-rate financing An adjustment for the property's use An adjustment for the property's location An adjustment for the property's operating expenses
how long-term construction contract are accounted for and some of the issues that are faced for financial reporting purposes.
Demonstrate how the MACRS depreciation percentages are calculated by theIRS using the half-year convention?
Which of the following best describes an accelerated depreciation method? A. A method by which an equal amount of expense is assigned for every full year of use. B. A method by which depreciation is based on the level of actual usage rather than the passage of time. C. A method of determining depreciation which assigns larger expenses to the initial years of an asset’s service and smaller expenses to the later years. D. A method of allocating the cost of a wasting asset to expense over the periods during which the value is removed from the property.
This depreciation method assumes that the annual cost of depreciation is a fixed percentage of the book value at the beginning of the year. Declining balance method O Sraight line method Sum-of-years digit method Sinking fund formula method