With Respect to Delaying Revenue Recognition Until Completion of a Long-Term

question 46

Multiple Choice

With respect to delaying revenue recognition until completion of a long-term contract, it is the case that:

• A) Estimated losses on the overall contract are recognized before the contract is completed.
• B) Expenses are recognized each period, but revenue is only recognized when the contract is completed.
• C) Use of this approach is not permitted under generally accepted accounting principles.
• D) Neither gains nor losses are recognized until the contract is completed.

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Definitions:

Sunk Cost Effect

The phenomenon where a person is more likely to continue an endeavor once an investment in money, effort, or time has been made.

Spearman's "G" Factor

The concept proposed by Charles Spearman that suggests a single, general intelligence factor underlies all cognitive abilities.

Intelligence

The ability to learn from experience, adapt to new situations, understand and handle abstract concepts, and use knowledge to manipulate one's environment.

Crystallized Intelligence

The capacity to apply acquired knowledge and experience efficiently.