Assume that there are two identical companies carrying out identical three-year projects.If one company uses the percentage-of-completion method and the other uses the cost-recovery method, in the first year will their gross profit and current ratios be the same or different? $\begin{array} { l l }
\text { Aross Profit } & \text { Current Ratio } \
\text { A. same } & \text { same } \
\text { B. same } & \text { different } \
\text { C. different } & \text { same } \
\text { D. different } & \text { different }
\end{array}$

Question

Assume that there are two identical companies carrying out identical three-year projects.If one company uses the percentage-of-completion method and the other uses the cost-recovery method, in the first year will their gross profit and current ratios be the same or different? $\begin{array} { l l } 
\text { Aross Profit } & \text { Current Ratio } \
\text { A. same } & \text { same } \
\text { B. same } & \text { different } \
\text { C. different } & \text { same } \
\text { D. different } & \text { different }
\end{array}$

Quizplus · Accepted Answer

The percentage-of-completion method recognizes revenue and gross profit throughout the project, while the cost-recovery method defers gross profit recognition until costs are recovered, leading to different gross profits. The current ratio may also differ due to differences in revenue recognition affecting current assets.

Assume That There Are Two Identical Companies Carrying Out Identical