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

question 8

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

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