In 2011,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 2011,Cashmere incurred $300,000 of costs on the contract,and in 2012 the contract was completed at a total cost of $425,000.Cashmere is not required to recognize any income from the contract until 2012.

Question

Quizplus · Accepted Answer

According to the revenue recognition principle, revenue should be recognized when it is earned and can be reliably measured. In this case, Cashmere Construction Company has not earned any revenue from the contract until it is completed in 2012, so they are not required to recognize any income until that time. Therefore, the statement is true.

In 2011,Cashmere Construction Company Enters into a Contract to Build