In selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be
A) the terms of payment in the contract.
B) the degree to which a reliable estimate of the costs to complete and extent of progress toward completion is practicable.
C) the method commonly used by the contractor to account for other long-term construction contracts.
D) the inherent nature of the contractor's technical facilities used in construction.

Question

Quizplus · Accepted Answer

The degree to which a reliable estimate of the costs to complete and extent of progress toward completion is practicable is the most important factor in selecting an accounting method for a long-term construction project. This is because the chosen accounting method must reflect the progress of the project and recognize revenue and expenses accordingly. If a reliable estimate of costs and progress cannot be made, it may be difficult to accurately account for revenue and expenses, leading to potential accounting errors or misstatements. The terms of payment, method commonly used by the contractor, and nature of technical facilities used in construction are also important factors to consider, but they should not be the principal factor in selecting an accounting method.

In Selecting an Accounting Method for a Newly Contracted Long-Term