Riverbed Tar and Gravel Ltd. operates a road construction business. In its first year of operations, the company won a contract to build a road for the municipality of Cochrane West. It is estimated that the project will be completed over a three-year period starting in June 2020. Riverbed uses the percentage-of-completion method of recognizing revenue on its long-term construction contracts. For tax purposes, and in order to postpone the tax on such revenue for as long as possible, Riverbed uses the completed-contract method allowed by the CRA. For the second year of operations, Riverbed made progress on the construction of the road for the municipality The account balances at December 31, 2020 and 2021, for the construction project and the accounting and tax balances of accounts related to the equipment used for construction follow: 2021 2020 Accounts Receivable $117,000 $320,000 129.000 100,000 Asset/Liability (net of billings to date of $ 798,000 and $400,000) 427,000 500,000 Revenue from Long-Term Contracts 415.000 350,000 Construction Expenses 1,100,000 1,100,000 Equipment Accumulated Depreciation-Equipment 455,000 170,000 618,000 980,000 Undepreciated Capital Cost Riverbed's tax rate is 25% for 2020 and subsequent years. Income before income tax for the year ended December 31, 2020, was $195,000 and for December 31, 2021, was $121,000. Riverbed Tar and Gravel Ltd. operates a road construction business. In its first year of operations, the company won a contract to build a road for the municipality of Cochrane West. It is estimated that the project will be completed over a three-year period starting in June 2020. Riverbed uses the percentage-of-completion method of recognizing revenue on its long-term construction contracts. For tax purposes, and in order to postpone the tax on such revenue for as long as possible, Riverbed uses the completed-contract method allowed by the CRA. For the second year of operations, Riverbed made progress on the construction of the road for the municipality The account balances at December 31, 2020 and 2021, for the construction project and the accounting and tax balances of accounts related to the equipment used for construction follow: 2021 2020 Accounts Receivable $117,000 $320,000 129.000 100,000 Asset/Liability (net of billings to date of $ 798,000 and $400,000) 427,000 500,000 Revenue from Long-Term Contracts 415.000 350,000 Construction Expenses 1,100,000 1,100,000 Equipment Accumulated Depreciation-Equipment 455,000 170,000 618,000 980,000 Undepreciated Capital Cost Riverbed's tax rate is 25% for 2020 and subsequent years. Income before income tax for the year ended December 31, 2020, was $195,000 and for December 31, 2021, was $121,000
