Choose the Correct Statement Concerning the Percentage-Of-Completion Method of Accounting

question 18

Multiple Choice

Choose the correct statement concerning the percentage-of-completion method of accounting for a firm with only one current long-term construction contract in process (assume no loss is projected) :

• A) The net current asset account (net of construction- in- process, and billings) exceeds that same account under the completed contract method.
• B) If the construction- in- process account exceeds the billings account, total costs to date must exceed total billings to date.
• C) If the construction- in- process account exceeds the billings account, total costs to date must exceed total cash received on the contract to date.
• D) It is possible to have both a net current asset account and a net current liability account in this situation.

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Definitions:

Present Values

A financial calculation that determines the current worth of a future sum of money or stream of cash flows, given a specified rate of return.

Market Rent

The prevailing rental rate for properties, typically of similar type and location, determined by the current market conditions.

Woodworking Equipment

Tools and machines used in the craft of making products from wood.

Consequential Damages

Losses incurred as an indirect result of an event, such as lost profits or revenues, that go beyond the direct physical damage or loss.