The Method of Reporting Gross Profit for Long Term Contracts

question 34

Multiple Choice

The method of reporting gross profit for long term contracts that does a better job of providing relevant information on the income statement is the ________.

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

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Definitions:

Substitute Goods

Products or services that can be used in place of one another, offering consumers alternatives.

Risk of Loss

Risk of loss refers to the legal and financial responsibility for damages, destruction, or loss of property, often determining who bears this risk during transactions or in the event of unforeseeable incidents.

Good Faith

Good faith refers to an honest intention to act without taking advantage of another person or to fulfill one's obligations or agreements.

Fair Dealing

A legal doctrine that permits limited use of copyrighted material without permission for purposes such as criticism, news reporting, teaching, and research.