Which of the Following Statements Is Incorrect with Respect to Revenue

question 14

Multiple Choice

Which of the following statements is incorrect with respect to revenue recognition of construction contracts?

• A) The percentage-of-completion method is to be applied for fixed price contracts if the recognition criteria are satisfied.
• B) IASB (2011) requires individual construction contracts to be accounted for separately and the requirements of the standard to be applied separately to each contract.
• C) The percentage-of-completion method should be used, provided certain conditions are met that enable the outcome of the contract to be reliably measured.
• D) Percentage-of-completion method requires contract revenue to be matched with progress billings, resulting in the reporting of revenue, expenses and profit which can be attributed to the amount billed to customers.

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Definitions:

LIFO Reserve

The difference between the cost of inventory calculated under the Last-In, First-Out (LIFO) method and its cost calculated under the First-In, First-Out (FIFO) method.

Historical Cost

The original monetary value of an asset or investment at the time of its purchase, disregarding inflation over time.

Accounting Principle

Guidelines and standards intended to bring consistency and integrity to the financial reporting process.

Cost Or Market

An inventory valuation method that requires inventory to be recorded at the lower of its historical cost or its current market value.