Which of the following is true about accounting for contract assets (CIP in excess of billings) in each balance sheet prior to completion of long-term construction contracts?
A) Contract assets are likely to be larger if revenue is recognized over time than if revenue is recognized at a point in time.
B) Contract assets are likely to be smaller if revenue is recognized over time than if revenue is recognized at a point in time.
C) Contract assets are likely to be the same size regardless of whether revenue is recognized over time or at a point in time.
D) There is no way to tell how revenue recognition timing will affect the size of contract assets without more information.

Question

Quizplus · Accepted Answer

Construction in progress includes both cost and gross profit (or overall contract loss) when revenue is recognized over time, but only cost (and overall contract loss) when revenue is recognized upon contract completion, so the contract asset is likely to be larger when revenue is recognized over time.

Which of the Following Is True About Accounting for Contract