When Using the Percentage-Of-Completion Method of Accounting for Long-Term Contracts

question 41

Multiple Choice

When using the percentage-of-completion method of accounting for long-term contracts, the percentage of completion used to recognize gross profit in the first year usually is determined by measuring:

• A)Costs incurred in the first year, divided by estimated remaining costs to complete the project.
• B)Costs incurred in first year, divided by estimated total costs of the completed project.
• C)Costs incurred in first year, divided by estimated gross profit.
• D)None of these is correct.

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Definitions:

Good Faith

Good faith refers to an honest intention to act without taking an unfair advantage over another party, often emphasized in contractual agreements and negotiations.

Six Months

A period of time equivalent to half a year or approximately 182 to 183 days.

Stop-Payment Order

A request made to a financial institution to cancel the processing of a check or payment before it has been cleared.

Bank's Liability

Bank's liability refers to the legal responsibility of a bank for its actions or inactions, including obligations towards customers, breaches of contract, or regulatory non-compliance.