Which of the Following Statements Regarding the Completed Contract Method

question 106

Multiple Choice

Which of the following statements regarding the completed contract method is NOT true?

• A) The company makes the same annual entries to record costs of construction, progress billings, and collections from customers as those under the percentage-of-completion method.
• B) The company makes the same entries to recognize revenue as those under the percentage-of-completion method.
• C) The company makes different entries to recognize revenue than under the percentage-of-completion method.
• D) Losses on an unprofitable contract are immediately recorded.

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Definitions:

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) that is globally recognized for financial reporting.

One-transaction Approach

A fiscal approach viewing an intercompany transaction as a singular event affecting consolidated financial statements, without recognizing it in individual accounts.

Two-transaction Approach

An accounting method where a transaction is considered to involve two separate events that are recorded independently.

Two-transaction Theory

A concept in accounting that proposes a business transaction affects two or more accounts in the ledger, which is fundamental to the double-entry bookkeeping system.