Using the Cost Method to Calculate the Percentage of Completion,the

question 4

Multiple Choice

Using the cost method to calculate the percentage of completion,the formula for the amount of revenue and gross profit to be recognised is:

• A) Costs incurred to the end of the current period divided by most recent estimate of total costs.
• B) Estimated total revenue or gross profit from the contract multiplied by (costs incurred to the end of the current period divided by most recent estimate of total costs) less (total revenue or gross profit recognised in prior periods).
• C) Costs incurred to the end of the current period divided by most recent estimate of total costs multiplied by (total revenue or gross profit recognised in prior periods).
• D) Estimated total revenue or gross profit from the contract divided by (costs incurred to the end of the current period multiplied by most recent estimate of total costs) less (total revenue or gross profit recognised in prior periods).
• E) None of the given answers.

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Definitions:

Assets And Liabilities

The financial rights or resources owned by a business (assets) and the obligations or debts it owes (liabilities).

Total Liabilities

The cumulative amount of all debts and obligations that a company owes to external parties or entities.

Priority

The status afforded to certain debts, making them more important or urgent to pay off compared to others in the context of liquidation or bankruptcy.

Unsecured Liability

A financial obligation that does not have collateral backing, meaning creditors may not have claims on the borrower's assets if the debt is not repaid.