The principal disadvantage of using the percentage-of-completion method of recognizing revenue from long-term contracts is that it
A) is unacceptable for income tax purposes.
B) gives results based upon estimates which may be subject to considerable uncertainty.
C) is likely to assign a small amount of revenue to a period during which a large amount of revenue was actually earned.
D) no revenue is recognized during the contract.

Question

Quizplus · Accepted Answer

The percentage-of-completion method relies heavily on estimates and assumptions, which can result in considerable uncertainty in the recognition of revenue. This can make financial statements less reliable and may lead to inaccuracies in reporting earnings.

The Principal Disadvantage of Using the Percentage-Of-Completion Method of Recognizing