CCIFP - Certified Construction Industry Financial Professional Construction Financial Statements Questions and Answers

Question 1

A construction company's year-end work-in-progress schedule shows a project with $1,200,000 in costs incurred and estimated earnings, but only $1,000,000 has been billed to the client.
How should this $200,000 difference be presented on the company's balance sheet?

Accepted Answer

As a current asset titled 'Costs and estimated earnings in excess of billings'

Answer

As a component of retained earnings

Answer

As a current liability titled 'Billings in excess of costs and estimated earnings'

Answer

As a reduction of revenue on the income statement

Question 2

In the footnotes to a construction company's financial statements, what is the primary purpose of disclosing the backlog of uncompleted contracts?

Accepted Answer

To provide an indication of the company's future revenues and workload.

Answer

To detail the historical profitability of all completed projects.

Answer

To list all subcontractors with outstanding payables.

Answer

To satisfy OSHA reporting requirements for active job sites.

Question 3

Which of the following transactions most directly results in a negative impact on a contractor's cash flow from operating activities, even if the project is profitable?

Accepted Answer

An increase in retainage receivable.

Answer

The collection of a standard accounts receivable.

Answer

An increase in retainage payable.

Answer

An increase in billings in excess of costs.

Question 4

A contractor is halfway through a fixed-price contract. At the end of the prior year, the project was projected to be profitable. During the current year, due to significant, unexpected material price increases, the revised total estimated cost to complete the project now exceeds the total contract price. According to GAAP, what is the proper accounting treatment for this anticipated loss in the current period's financial statements?

Accepted Answer

The entire anticipated loss on the contract must be recognized in the current period.

Answer

The loss should be deferred until the project is substantially complete.

Answer

The loss should be recognized proportionally over the remaining life of the contract.

Answer

Only the portion of the loss related to work performed in the current period should be recognized.

Question 5

A surety underwriter is evaluating a contractor's ability to finance its current workload and take on new projects. Which financial ratio most directly links the contractor's volume of uncompleted work to its available liquid resources?

Accepted Answer

Backlog-to-Working Capital Ratio (Backlog / Working Capital)

Answer

Current Ratio (Current Assets / Current Liabilities)

Answer

Debt-to-Equity Ratio (Total Liabilities / Shareholder Equity)

Answer

Gross Profit Margin (Gross Profit / Revenue)

Question 6

Which of the following best describes the account 'Billings in excess of costs and estimated earnings' on a contractor's balance sheet?

Accepted Answer

A liability representing payments received from a client for work that has not yet been performed or earned.

Answer

An asset representing revenue earned but not yet billed to the client.

Answer

An equity account reflecting the cumulative profit on all active jobs.

Answer

An expense account used to accumulate costs related to unapproved change orders.