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

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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.

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