Revenue on a Long-Term Contract Should Not Be Recognized According

question 248

Multiple Choice

Revenue on a long-term contract should not be recognized according to the proportion of the performance obligation that has been completed if:

• A) Completion rates are certain.
• B) Profits are low.
• C) Projects are more than five years to completion.
• D) The arrangement does not qualify for revenue recognition over time.

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Definitions:

Uncollectible Accounts

Accounts receivable that a business cannot collect, often recognized as an expense as bad debt or written off.

Aging

A method used in accounting to categorize accounts receivable based on the length of time an invoice has been outstanding.

Accounts Receivable

Accounts receivable refer to the money owed to a company by its customers for goods or services already delivered but not yet paid for.

Allowance for Doubtful Accounts

An account that offsets assets, specifically designed to anticipate the part of accounts receivable that might be uncollectible.