Contract Method
If a company accumulated $10,000,000 in costs and bills its customers for $12,000,000, how much profit is recognized using the completed contract method?
$2,000,000
__________ are the typical accounts involved when billing a customer for the job.
Accounts receivable and contract billings
Under the completed contract method, when are revenues recorded?
After the job is completed
Using the completed contract method to account for the revenue and expenses before the job is completed, which of the following accounts will be used?
Construction in process and accounts payable
In the percentage of completion method, how is gross margin calculated?
Contract revenues - Estimated contract costs
On what financial statement are all aspects of the contract first recorded, under the completed-contract method?
Balance sheet
Using the completed contract method to account for the revenue and expenses before the job is completed, in which of the following financial statements will revenues be recorded?
Balance sheet
Which revenue-recognition method is typically selected when a business has a long-term contract for which they are accounting?
Completed-contract
When the job is complete, holding accounts need to be closed. Which of the following is a typical account involved in this process?
Construction in process
When revenue is earned off-contract, businesses use which of the following methods of revenue recognition?
Percentage of completion and completed contract method
A business reasonably assumes that a contract is complete when the following criteria are met:
Remaining are insignificant Most of the costs are in
Which of the following are not recognized until a contract is completed?
Revenue
Which of the following makes the completed contract method different from the percentage of completion method in recognizing revenues and expenses?
Revenues and expenses are recorded after the project is completed.
The contract-completion method should only be used in which of the following circumstances?
There are weather or hazardous conditions that may affect a project
method are skewed because of the delay of revenue recognition.
completed contract
method, expenses are recognized when the contract is completed.
completed-contract
account is where cost will accumulate during the contract period.
construction in process
Under the completed-contract method, businesses do not record revenues until the contract is completed, allowing the business to have a
lower
Under the completed-contract method, revenues are
recognized