Which Accounting Method Is Permitted Under ASPE for Construction Contracts

question 43

Multiple Choice

Which accounting method is permitted under ASPE for construction contracts in limited circumstances?

• A)An accounting method that recognizes revenue and expenses on a cash basis.
• B)An accounting method that recognizes revenue and expenses only after it is completed.
• C)An accounting method that recognizes costs as incurred and an amount of revenue equal to the costs that are expected to be recovered on the contract.
• D)An accounting method that recognizes revenue and expenses based on the fair value of the contract.

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Definitions:

Reduced Wage

A wage that is decreased from a previous level, often due to economic pressures or changes in job responsibilities.

Income Effect

The alteration in a person's or economic system's earnings and the effect of this alteration on the demand for a particular product or service.

Wage Decrease

A reduction in the hourly or salaried compensation paid to workers.

Utility Maximizing

The economic principle that individuals and firms strive to achieve the highest satisfaction or benefit from their resources and choices.