Question

Arizona Desert Homes (ADH) constructed a new subdivision during 2020 and 2021 under contract with Cactus Development Co. Relevant data are summarized below:

Contract amount		$	3,000,000
Cost:	2020		1,200,000
	2021		600,000
Gross profit:	2020		800,000
	2021		400,000
Contract billings:	2020		1,500,000
	2021		1,500,000

ADH recognizes revenue over time with respect to these contracts.

In its December 31, 2020, balance sheet, ADH would report:

  

A) The contract asset, deferred profit, of $400,000.

B) The contract asset, cost and profits in excess of billings, of $500,000.

C) The contract asset, contract amount in excess of billings, of $1,500,000.

D) The contract liability, billings in excess of cost, of $300,000.

Answer 1

ADH recognizes Revenue
contract billing			1500000
less: cost 2020			1200000
contract laibility ,billing in excess			300000
of cost
Option " D " is CORRECT