The Percentage-Of-Completion Method Must Be Used When Certain Conditions Exist

question 124

Multiple Choice

The percentage-of-completion method must be used when certain conditions exist. Which of the following is not one of these necessary conditions?

• A) Estimates of progress toward completion, revenues, and costs are reasonably dependable.
• B) The contractor can be expected to perform the contractual obligation.
• C) The buyer can be expected to satisfy some of the obligations under the contract.
• D) The contract clearly specifies the enforceable rights of the parties, the consideration to be exchanged, and the manner and terms of settlement.

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Definitions:

Net Income

The total profit of a company after all expenses and taxes have been subtracted from total revenue.

Proportionately Adjusted Balance Sheet

A financial statement showing assets, liabilities, and equity after adjustments have been made to reflect a fair proportionate value based on ownership interests or specific conditions.

Inventory

The raw materials, work-in-process products, and finished goods that a company holds for the purpose of sale in the near future.

Contractual Agreement

A legally binding agreement between two or more parties that outlines the terms and conditions of a particular arrangement or transaction.