Under the Percentage-Of-Completion Method, How Should the Balances of Progress

question 91

Multiple Choice

Under the percentage-of-completion method, how should the balances of progress billings and construction in process be disclosed in the financial statements prior to the completion of the contract?

• A) progress billings as deferred income, construction in progress as a deferred expense
• B) progress billings as income, construction in process as inventory
• C) net, as a current asset if a debit balance, and a current liability if a credit balance
• D) net, as income from construction if a credit balance, and loss from construction if a debit balance

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Definitions:

Foreign Trade Zones

Designated areas where goods can be imported, stored, handled, manufactured, or reconfigured without being subject to customs duty.

Labor Costs

The total expenditures related to compensating employees, including wages, benefits, and taxes.

Customs Clearance

The process of obtaining permission to import or export goods from one country to another, including the payment of duties and taxes.

Supplier's Country

The nation in which a supplier or producer of goods or services is located or operates from.