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Boing Companies began operations on January 1, 2020. The company only has one client for whom...

Boing Companies began operations on January 1, 2020. The company only has one client for whom it is building an airplane at a price of $ 2,000,000. The costs incurred during 2020 and directly related to the construction of the aircraft were $ 375,000. The company estimates that the total costs required to complete construction is $ 1,125,000. The following is the partial financial statement of the Boing Company for 2020.

 

BOING COMPANIES

Statement of Financial Position

As of December 31, 2020

ASSETS:

 

 

Current assets:

 

 

Cash

 

$ 100,000

Accounts Receivable

 

 150,000

Inventory:

 

 

Construction in Progreso

 375,000

 

Construction in Progreso

(350,000)

  25,000

Other current assets

 

  225,000

 

 

 

Total Current Assets

 

$ 500,000

 

Based on the information provided, what method is Boing using to account for the construction contract?

Select one: a. Percentage of Completion

b. Can't determine

c. Term Sales

d. Contract Completed

business   accounting   
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Answer #1

The mthod followed by the company is Percentage of completion method. Because inventory has been valued till the cost incurred till date

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