Under GAAP, a Company May Freely Choose Whether to Use

question 36

True/False

Under GAAP, a company may freely choose whether to use the percentage of completion method, or the completed contract method, of accounting for long-term contracts. Neither method is preferred by the FASB.

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Definitions:

Straight-Line Method

A method of calculating depreciation of an asset that allocates an equal portion of the asset's cost to each year of its useful life.

Discount on Bonds Payable

The difference when bonds are issued for less than their face value.

Carrying Value

The book value of assets and liabilities reported in the financial statements, considering depreciation or amortization.

Bond Payable

A long-term liability account that records the amounts owed to bondholders by the issuer.