The Principle Disadvantage of Using the Percentage-Of-Completion Method of Recognizing

question 129

Multiple Choice

The principle disadvantage of using the percentage-of-completion method of recognizing revenue from long-term construction contracts is that it:

• A) May require that inter-period tax allocation procedures be used.
• B) is likely to assign a small amount of revenue to a period during which much revenue actually was earned.
• C) is unacceptable for tax purposes.
• D) Gives results based upon estimates, which may be subject to considerable uncertainty.

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Definitions:

Base Year

A reference year used for comparative analysis, often in calculating economic indicators like indexes.

Absolute Change

The difference between the final value and the initial value of a quantity, without regard to the direction of change.

Price Level

A summary average of current prices for the full spectrum of goods and services in the economy.

Consumer Price Index

An index of the variation in prices paid by typical consumers for retail goods and other items.