When Work to Be Done and Costs to Be Incurred

question 12

Multiple Choice

When work to be done and costs to be incurred on a long-term contract can be estimated dependably, which of the following methods of revenue recognition is preferable under private entity GAAP?

• A)Instalment method
• B)Percentage-of-completion method
• C)Completed-contract method
• D)None of these

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Definitions:

Wage Rate

Compensation received by an employee for performed work, typically quantified on an hourly, daily, or yearly basis.

MRP

The extra income produced by using an additional unit of a resource or production factor.

Capital

Assets such as funds, equipment, and real estate used in business operations that contribute to the production of goods and services.

Labor

The human effort, either physical or mental, that is used in the production of goods and services.