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

question 39

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 defers 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 defers 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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Definitions:

Equal Pay Act

A labor law that prohibits gender pay discrimination, requiring equal pay for equal work performed by men and women.

Sex Discrimination

involves treating someone unfavorably because of their sex or gender, which is prohibited under various laws.

Negligence Suit

A legal action brought against someone accused of failing to exercise a reasonable standard of care, resulting in harm or damage to another.

Damages

Compensation sought or awarded in a legal proceeding as a remedy for breach of contract or tortuous act.