Which Formula Explains How Gross Profit Is Recognized When an Overall

question 49

Multiple Choice

Which formula explains how gross profit is recognized when an overall loss is expected on the contract under the percentage completion method?

• A)Cost incurred / Estimated total cost.
• B)(Cost incurred / Estimated total cost)× Contract revenue - Revenue previously recognized.
• C)(Cost incurred / Estimated total cost)× Estimated total cost - Cost of sales previously recognized.
• D)100% × (Estimated gross loss)- (Gross profit/loss previously recognized).

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Definitions:

Unconscionable

Actions or terms that are excessively unfair or unjust, often highlighted in legal contexts such as contracts.

Undue Influence

A situation where an individual is persuaded to act against their will or best interest through the excessive pressure or manipulation of another, impacting contractual agreements.

Voidable

Describes a contract or transaction that remains valid until it is declared void by one of the parties due to certain conditions such as fraud or misrepresentation.

Fraud

The intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right.