How should the balances of progress billings and construction in progress be shown at reporting dates prior to the completion of a long-term contract?

Question

A. Progress billings as deferred income, construction in progress as a deferred expense.

B. Progress billings as income, construction in progress as inventory.

C. Net, as a current asset if debit balance and current liability if credit balance.

D. Net, as gross profit from construction if credit balance, and loss from construction if debit balance.

Deleted user · Answer

B. Progress billings as income and, construction in progress as inventory.

but to clarify:

Y1:

Dr. Construction in process

Cr. Accounts payable

Y1: then billings to contra account

Dr. Contracts receivable

Cr. Progress Billings

Then to reflect the gross profit, revenues and expenses:

Dr. Construction in progress

Dr. Construction expense

Cr. Construction revenue