Which Statement About the Cost Recovery Method Is Correct

question 42

Multiple Choice

Which statement about the cost recovery method is correct?

• A)The method recognizes contract revenues on a cash basis.
• B)The method recognizes revenue and expenses in proportion to the degree of progress.
• C)This method recognizes defers any profit until the contract is completed.
• D)This method is the preferred method for recognizing revenue.

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Definitions:

Marginal Tax Rate

The rate at which the last dollar of income is taxed, representing the percentage of tax applied to your income for each tax bracket in which you qualify.

Average Tax Rate

The ratio of the total amount of taxes paid to the total tax base (taxable income or spending), showing the percentage of income or spending that goes to taxes.

Income Tax Liability

The amount of tax that an individual or entity is legally obligated to pay to a tax authority, based on their income.

Vertical Equity

A principle of taxation that suggests taxpayers with a higher ability to pay should contribute more in taxes than those with a lesser ability to pay.