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:

Patents

Legal documents granting an inventor exclusive rights to produce, use, and sell an invention for a certain period of time.

Amortized

Gradual reduction of a debt over a period of time through regular payments, which may include portions of both principal and interest.

Fully Depreciated

The status of an asset after its cost has been completely allocated over its useful life, leaving it with no book value.

Book Value

The net value of a company's assets minus its liabilities, as recorded on the balance sheet.