When Comparing the Percentage-Of-Completion and Completed-Contract Methods of Accounting for Long-Term

question 67

Multiple Choice

When comparing the percentage-of-completion and completed-contract methods of accounting for long-term construction contracts,both methods will report the same

• A) balances each period in the Progress Billings account.
• B) expense for cost of construction each year.
• C) amount of income in the year of completion.
• D) inventory carrying value each year during the construction period.

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Definitions:

Negative Externality

A cost that affects a party who did not choose to incur that cost or benefit from it, often considered a failure of the market.

Market Inefficiency

A situation where market prices do not always accurately reflect the true value of a good or service, possibly due to lack of information or irrational behavior.

Supply And Demand Diagram

A graphical representation of the relationship between the quantities of a good that sellers are willing to sell and buyers are willing to buy, at various prices.

Negative Externality

A negative externality occurs when a product or decision costs a third party who did not choose to incur that cost.