$320$

SECTION $1$

BE $6-34$

Long$-$term contract; revenue recognition over time; balance sheet

LO$6-8,$ LO$6-9$

BE $6-35$

Long$-$term

contract; revenue recognition upon completion

LO$6-9$

BE $6-36$

Long$-$term contract; revenue recognition; loss on entire project

L$06-9$

The Role of Accounting as an Information System

Refer to the situation described in BE $6-33.$ Assume that, during the first year the company billed its customer $$7$ million, of which $$5$ million was collected before year$-$end. What would appear in the year$-$end balance sheet related to this contract?

Refer to the situation described in BE $6-33.$ Assume that the building was completed during the second year, and construction costs incurred during the second year were $$10$ million. How much revenue and gross profit or loss will the company recognize in the first and second year if it recognizes revenue upon contract completion?

Franklin Construction entered into a fixed$-$price contract to build a freeway$-$connecting ramp for $$30$ million. Construction costs incurred in the first year were $$16$ million and estimated remaining costs to complete at the end of the year were $$17$ million. How much gross profit or loss will Franklin recognize in the first year if it recognizes revenue over time according to percentage of completion? What if instead Franklin recognizes revenue upon contract completion?