Cost Estimates at the End of the Second Year Indicate

question 137

Multiple Choice

Cost estimates at the end of the second year indicate that a loss will result on completion of the entire contract. Which of the following statements is correct?

• A) Under the completed-contract method, the loss is not recognized until the year the construction is completed.
• B) Under the percentage-of-completion method, the gross profit recognized in the first year must not be changed.
• C) Under the completed-contract method, when the billings exceed the accumulated costs, the amount of the estimated loss is reported as a current liability.
• D) Under the completed-contract method, when the Construction in Process balance exceeds the billings, the estimated loss is added to the accumulated costs.

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Definitions:

Dichotomy

A division or contrast between two things that are represented as being entirely different or opposite.

Continuum

Refers to a continuous sequence where adjacent elements are not perceptibly different from each other, but the extremes are quite distinct.

Sex-typed

Sex-typed refers to behaviors, roles, or attributes considered traditionally masculine or feminine within a cultural or societal context.

Sophisticated

Characterized by a high level of complexity, refinement, or development, often in relation to culture, taste, or technology.