In 2016,Cashmere Construction Company enters into a contract to build a beach cottage for Martha and Rob for a total price of $500,000.Cashmere estimates the total cost to complete the cottage to be $400,000.In 2016,Cashmere incurred $300,000 of costs on the contract,and in 2017 the contract was completed at a total cost of $425,000.Cashmere is not required to recognize any income from the contract until 2017.

Question

Quizplus · Accepted Answer

Cashmere Construction Company follows the percentage-of-completion method, which requires recognition of income as work progresses. Since the contract was not completed until 2017 and it is stated that Cashmere is not required to recognize any income until 2017, it is true that the income should not be recognized until then.

In 2016,Cashmere Construction Company Enters into a Contract to Build