Cost Estimates on a Long-Term Contract May Indicate That a Loss

question 3

Multiple Choice

Cost estimates on a long-term contract may indicate that a loss will result on completion of the entire contract. In this case, the entire expected loss should be

• A) recognized in the current period, regardless of whether the percentage-of-completion or completed-contract method is used.
• B) recognized in the current period under the percentage-of-completion method, but the completed-contract method should defer recognition of the loss to the time when the contract is completed.
• C) recognized in the current period under the completed-contract method, but the percentage-of-completion method should defer the loss until the contract is completed.
• D) deferred and recognized when the contract is completed, regardless of whether the percentage-of-completion or completed-contract method is used.

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