Sahara Desert Homes (SDH) reports under IFRS and constructed a new subdivision during 2020 and 2021 under contract with Cactus Development Co. Relevant data are summarized below: Contract amount $ 3,000,000 Cost: 2020 1,200,000 2021 600,000
Gross profit: 2020 800,000 2021 400,000
Contract billings: 2020 1,500,000 2021 1,500,000
SDH uses the cost recovery method under IFRS to recognize revenue.
In its December 31, 2020, balance sheet, SDH would report:.
a. The asset, cost and profits in excess of billings, of $500,000.
b. The liability, billings in excess of cost, of $300,000.
c. The asset, contract amount in excess of billings, of $1,500,000.
d. The asset, deferred profit, of $400,000.