Under the Earnings Approach, How Should Earned but Unbilled Revenues

question 19

Multiple Choice

Under the earnings approach, how should earned but unbilled revenues at the balance sheet date on a long-term construction contract be disclosed if the percentage-of- completion method of revenue recognition is used?

• A)As construction in process in the current asset section of the balance sheet.
• B)As construction in process in the noncurrent asset section of the balance sheet.
• C)As a receivable in the noncurrent asset section of the balance sheet.
• D)In a note to the financial statements until the customer is formally billed for the portion

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Definitions:

Closing Entry

Journal entries made at the end of an accounting period to transfer balances from temporary accounts to permanent ones and prepare the company's books for the next period.

Income Summary

An account in the ledger that is used to gather all temporary accounts during the closing process, to transfer their balances to permanent accounts.

Retained Earnings

The portion of net earnings not paid out as dividends but retained by the company to reinvest in its core business or to pay debt.

Balance Sheet

A business statement that consolidates the assets, debts, and shareholder equity of a company at a certain point.