When the 'percentage-of-completion' method is used for construction contracts,how are expenses recorded?
A)The liability account deferred gross profit is proportionately allocated
B)The total accumulated costs of construction are expensed when the project is completed
C)For a given period the actual construction costs for that period are expensed
D)None of the above

Question

Quizplus · Accepted Answer

When using the percentage-of-completion method, expenses are recorded based on the actual construction costs for a given period. This means that expenses are recognized at the time they are incurred rather than waiting until the project is completed. Option A is incorrect because deferred gross profit is a balance sheet account and is not used to record expenses. Option B is incorrect because expensing the total accumulated costs at completion would not properly match expenses with the revenue recognized during the construction process.

When the 'Percentage-Of-Completion' Method Is Used for Construction Contracts,how Are