When There Is a Significant Increase in the Estimated Total

question 82

Multiple Choice

When there is a significant increase in the estimated total contract costs but the increase does not eliminate all profit on the contract, which of the following is correct?

• A)Under both the percentage-of-completion and the cost-recovery methods, the estimated cost increase requires a current period adjustment of excess gross profit recognized on the project in prior periods.
• B)Under the percentage-of-completion method only, the estimated cost increase requires a current period adjustment of excess gross profit recognized on the project in prior periods.
• C)Under the cost-recovery method only, the estimated cost increase requires a current period adjustment of excess gross profit recognized on the project in prior periods.
• D)No current period adjustment is required.

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Definitions:

CSR Strategies

Corporate Social Responsibility strategies involve plans and actions undertaken by a company to manage its impacts on society, the economy, and the environment in a responsible manner.

Responsibilities

Duties or obligations that individuals or organizations are expected to fulfill or carry out in their roles.

Proactive

Taking initiative by acting in advance of future situations rather than just reacting, to bring about positive change.

Ethics Intensity

The degree of importance given to the ethical dimension of decisions and actions.