Which of the Following Statements Regarding the Percentage-Of-Completion and Completed

question 111

Multiple Choice

Which of the following statements regarding the percentage-of-completion and completed contract methods of accounting for long-term construction contracts are true?

• A) They recognize different amounts of income for the construction period.
• B) They produce the same inventory carrying values during the construction period.
• C) Neither requires losses to be recognized in the period of occurrence.
• D) Under only the percentage of completion method is it possible to recognize a loss for the period when an overall profit is expected on the contract.

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Definitions:

Pro Forma Statements

Financial statements that project the future financial performance of a company based on current and historical data.

Financial Plans

Structured approaches to managing finances that encompass goals, strategies for achieving them, and an analysis of resources and expenditures.

Future Time Periods

Specific intervals or durations in the future during which certain financial or operational activities are expected to occur.

Capital Intensity Ratio

A metric showing the amount of capital needed per dollar of revenue; high ratios indicate a significant investment in physical capital to generate sales.