Seasons Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1,550,000 each quarter. The total contract price is $18,600,000 and Seasons estimates total costs of $17,750,000. Seasons estimates that the building will take 3 years to complete, and commences construction on January 2, 2021.

At December 31, 2021, Seasons estimates that it is 30% complete with the construction, based on costs incurred. What is the total amount of Revenue from Long-Term Contracts recognized for 2021 and what is the balance in the Accounts Receivable account assuming Cannon Company has not yet made its last quarterly payment?

Revenue Accounts Receivable

a. $6,200,000 $6,200,000

b. $5,325,000 $1,550,000

c. $5,580,000 $1,550,000

d. $5,325,000 $6,200,000

ANSWER: C (need explanation)