Choose the correct statement concerning the percentage-of-completion method of accounting for a firm with only one current long-term construction contract in process (assume no loss is projected):
A) The net current asset account (net of construction- in- process, and billings) exceeds that same account under the completed contract method.
B) If the construction- in- process account exceeds the billings account, total costs to date must exceed total billings to date.
C) If the construction- in- process account exceeds the billings account, total costs to date must exceed total cash received on the contract to date.
D) It is possible to have both a net current asset account and a net current liability account in this situation.

Question

Quizplus · Accepted Answer

Under the percentage-of-completion method, revenue and expenses are recognized as the work progresses, leading to a higher net current asset account compared to the completed contract method, where revenue and expenses are recognized only at the end of the contract.

Choose the Correct Statement Concerning the Percentage-Of-Completion Method of Accounting