Cost Estimates on a Long-Term Contract May Indicate That a Loss

question 140

Multiple Choice

Cost estimates on a long-term contract may indicate that a loss will result on completion of the entire contract. In this case, the entire expected loss should be

• A) recognized in the current period, regardless of whether the percentage-of-completion or completed-contract method is employed.
• B) recognized in the current period under the percentage-of-completion method, but the completed-contract method defers recognition of the loss to the time when the contract is completed.
• C) recognized in the current period under the completed-contract method, but the percentage-of-completion method defers the loss until the contract is completed.
• D) deferred and recognized when the contract is completed, regardless of whether the percentage-of-completion or completed-contract method is employed.

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Definitions:

Eating

The act of consuming food in order to provide nutritional support to the body.

Abraham Maslow

A renowned American psychologist who developed the hierarchy of needs theory, which suggests psychological well-being is based on meeting basic human needs.

Hierarchy

Hierarchy is a system or organization in which people or groups are ranked one above the other according to status or authority.

Needs

Fundamental requirements that individuals must fulfill to achieve basic physiological and psychological well-being.