The Theoretical Support for Using the Percentage-Of-Completion Method of Accounting

question 42

Multiple Choice

The theoretical support for using the percentage-of-completion method of accounting for long-term construction projects is that it

• A) is more conservative than the completed-contract method.
• B) reports a lower Net Income figure than the completed-contract method.
• C) more closely conforms to the cost principle.
• D) produces a realistic matching of expenses with revenues.

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Definitions:

Capital Resources

Assets used in the production of goods and services, such as buildings, machinery, equipment, and tools.

Profit Maximization

The process or strategy aimed at achieving the highest possible profits within a business operation.

Economic Resources

Assets or inputs used for the production of goods and services, typically categorized into land, labor, capital, and entrepreneurship.

Marginal Product

Marginal product is the additional output generated by using one more unit of a particular input while keeping other inputs constant.