A Company Uses the Percentage-Of-Completion Method to Account for a Four-Year

question 2

Multiple Choice

A company uses the percentage-of-completion method to account for a four-year construction contract.Progress billings sent in the second year that were collected in the third year would

• A) be included in the calculation of the income recognized in the second year.
• B) be included in the calculation of the income recognized in the third year.
• C) be included in the calculation of the income recognized in the fourth year.
• D) not be included in the calculation of the income recognized in any year.

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Definitions:

Accumulated Depreciation

The total amount of a tangible fixed asset's cost that has been allocated as depreciation expense since the asset was put into use.

Differential Profit

The difference in profit between two business choices, helping in decision-making by highlighting the financial impact of each option.

Lease-End

The conclusion of a lease agreement, at which point the lessee may have options such as renewing the lease, returning the asset, or purchasing it.

Broker Commission

A fee paid to a broker for executing a transaction, typically a percentage of the transaction value.