Dilla Construction Company's Projects Extend Over Several Years and Collection

question 36

Multiple Choice

Dilla Construction Company's projects extend over several years and collection of receivables is reasonably certain. Each project has a contract that specifies a price and the rights and obligations of all parties. Both the contractor and the customer are expected to fulfill their contractual obligations on each project. Reliable estimates can be made of the extent of progress and cost to complete each project. The method that the company should use to account for construction revenue is

• A) installment sales.
• B) percentage-of-completion.
• C) completed-contract.
• D) cost recovery.

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Definitions:

Creditor

An entity (person or institution) to which money is owed.

Discounted Note

A financial instrument that is sold for less than its face value and matures at face value, resulting in a gain for the holder upon maturity.

Interest-Bearing Note

A debt instrument that requires the issuer to pay a specified interest rate to the holder until the note is repaid.

Installment Note

A financial instrument that details a loan to be repaid with interest in periodic payments over a set period.