When losses occur on long-term contracts using the completed-contract method,they are recognized
A)proportionately over the contract period using costs incurred as a base.
B)evenly over the contract period.
C)in their entirety as soon as it becomes known that a loss will be suffered.
D)at the completion of the project.

Question

Quizplus · Accepted Answer

Under the completed-contract method, losses on long-term contracts are recognized in their entirety as soon as it becomes known that a loss will be suffered. This means that the losses are not recognized until the end of the contract or until it becomes evident that the project will result in a loss. This method defers recognition of revenue and expenses until the project is completed. In contrast, the percentage-of-completion method recognizes revenue, expenses, and profit or loss each period based on the percentage of the project completed during that period.

When Losses Occur on Long-Term Contracts Using the Completed-Contract Method,they