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