Choose the correct description of the net balance of costs in excess of billings on long-term contracts. Assume only one current contract, and that contract price does not equal total estimated contract cost at the end of the current year.
A) Under completed contract, the balance equals cost plus billings.
B) Under completed contract, the balance equals total estimated profit less billings.
C) Under percentage of completion, the balance equals cost to date less billings, if profit has been recognized.
D) Under percentage of completion, the balance equals cost to date less billings, less total projected loss.

Question

Quizplus · Accepted Answer

The net balance of costs in excess of billings on long-term contracts under percentage of completion equals cost to date less billings, less total projected loss. This is because under percentage of completion, revenue and expenses are recognized proportionately as work is completed, and any projected loss on the contract is recognized immediately.

Choose the Correct Description of the Net Balance of Costs