explain this from sample exam answers percentage, completed, contract, accounts, provides

optiix

Compared to the completed contract method, the percentage completion method will most likely result in higher total assets, reflecting the accrual of gross profit during the contract period and lower liabilities, as the higher level of constructioninprogress provides a larger offset to advance billings.
How does percentage of completion equal higher total assets? If your accounts receivable drops while cash increases there isn’t a change in total assets is there? Can someone explain this?

lxwarr30

hmmm….anyone else on this?

Siddimaula

Don’t quote me on this, but my understanding is CC would have higher assets since you’re capitalizing your cash outflows as WIP Inventory.