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:

Price Level

The average of the current prices of goods and services produced in the economy, often used as a measure to track inflation or deflation.

Money Supply

The collective sum of all monetary resources in an economy, including cash, coins, and savings and checking account balances, at a particular time.

Interest Rates

The expense associated with taking out a loan or the profit from an investment, presented as a percentage of the initial amount.

Stock Prices

The cost of purchasing a share in a company, reflecting the company's value and investor expectations about its future profitability.