How Is Revenue Recognized on a Cost Plus 7% Contract

question 53

Multiple Choice

How is revenue recognized on a cost plus 7% contract?

• A)Revenue is recognized only after the contract is completed.
• B)Revenue and expenses are recognized in proportion to the degree of progress.
• C)Record an amount of revenue equal to the costs that are expected to be recovered on the contract.
• D)Revenue equal to the cost plus 7% profit will be recorded each year.

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Definitions:

Economic Model

A simplified representation of economic processes, used to analyze and predict economic behaviors.

Financial Crisis

A broad term for a variety of situations in which some financial assets suddenly lose a large part of their nominal value, often leading to a collapse of markets and economies.

Economic Model

A simplified representation of reality used to analyze and predict economic behaviors and outcomes.

Opportunity Costs

Refers to the benefits or gains a person or organization misses out on when choosing one alternative over another.