Construction in Progress / Net Advanced Billings question

CFA Level I
#1

Hey y’all, hopefully somebody can help me out with this question. What is the difference between [percentage completion] CONSRUCTION IN PROGRESS and [completed contract method] CONSTRUCTION IN PROGRESS? What is the difference between [percentage completion] NET ADVANCED BILLINGS and [completed contract] NET ADVANCED BILLINGS? anything helps, thanks yancey

#2

There is NO DIFFERENCE between these two. They are calculated in exactly the same manner. Only difference is the actual numbers that plug in. Because you do not recognize any revenue until the project is complete in the completed contract method, you have the Income portion which would be zero. and Cash Received + Income - Advance Billings =============== Net Advance Billings

#3

thanks. CIP/Net Advanced Billings questions can be tricky, then they throw in % completion and completed contract CHANGES, and they get more tricky…

#4

cpk123 Wrote: ------------------------------------------------------- > There is NO DIFFERENCE between these two. They are > calculated in exactly the same manner. Only > difference is the actual numbers that plug in. > Because you do not recognize any revenue until the > project is complete in the completed contract > method, you have the Income portion which would be > zero. > > and > > Cash Received > + Income > - Advance Billings > =============== > Net Advance Billings Net Construction in Progress =============== Hi cpk, does ‘Income’ in your equation mean ‘profit recognized whilst the construction is in progress’ because that is what It should be ideally be and to add to the confusion, CCM doesn’t recognize any profits till the constuction is complete, so in that case your ‘income’ component would be ZERO - Dinesh S

#5

yes… the income I have said is the “profit” recognized while Construction is in progress. In % Complete Revenue == Prorated based on Cost incurred in period and Total Cost - Cost Incurred =========== Profit / Income =========== In Completed Contract Income = 0 till last period, when entire profit on the contract is recognized. CP