In accounting for a long-term construction contract for which there is a projected profit,the balance in the Construction in Progress account at the end of the first year of work using the percentage-of-completion method would be
A) zero.
B) the same as the completed-contract method.
C) higher than the completed-contract method.
D) lower than the completed-contract method.

Question

Quizplus · Accepted Answer

The percentage-of-completion method recognizes revenue and expenses in proportion to the percentage of the contract completed. Therefore, if there is a projected profit, the revenue recognized will be higher than expenses incurred in the first year, resulting in a higher balance in the Construction in Progress account compared to the completed-contract method.

In Accounting for a Long-Term Construction Contract for Which There