Reference no: EM132668438
On June 30, 2019, Tier One Construction Company began construction of a new arena in Seattle, which will host the home games of the new NHL team, the Seattle Kraken.
Tier One agreed to complete the stadium by June 30, 2021, at a fixed price of $ 1,500,000,000. Tier One has a fiscal year that ends on December 31, and will recognize revenue on the contract over time, and plans on using the ratio "Costs Incurred"/"Estimated Total Costs" to measure percentage of completion.
Information related to the contract at various points in time is as follows:
Dec. 31, 2019 Dec. 31, 2020 June 30, 2021
Cumulative Costs Incurred $ 300,000,000 $ 910,000,000 $ 1,325,000,000
Estimated Remaining Costs 900,000,000 390,000,000 0
Cumulative Amount
Billed to Customer 400,000,000 800,000,000 1,500,000,000
Problem 1: Based on the information provided above, Tier One Construction will report an ASSET / LIABILITY (circle one) in the amount of $ _____________ on their December 31, 2019 Balance Sheet related to the difference between "Construction in Progress" and "Billings on Construction in Progress".
Problem 2: How much revenue will Tier Once Construction report on this contract for their Fiscal year ending December 31, 2020?
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