How should the balances of progress billings and construction in process be shown at reporting dates prior to the completion of a long-term 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 debit balance, and current liability if credit balance.
D) Net, as income from construction if credit balance, and loss from construction if debit balance.

Question

Quizplus · Accepted Answer

Under the percentage-of-completion method, the balances of progress billings and construction in process are reported net on the balance sheet. If the net amount is a debit balance, it is shown as a current asset. If it is a credit balance, it is shown as a current liability. This approach reflects the ongoing nature of the construction project and the net position of the contract at the reporting date.

How Should the Balances of Progress Billings and Construction in Process