Ch. 18 T/F

The principal advantage of the completed-contract method is that reported revenue reflects final results rather than estimates.

True

Trade loading is a practice through which manufacturers try to show sales, profits, and market share they don't actually have.

True

Under the completion-of-production basis, companies recognize revenue when agricul-tural crops are harvested since the sales price is reasonably assured and no significant costs are involved in product distribution.

True

The installment-sales method defers only the gross profit instead of both the sales price and cost of goods sold.

True

The most popular input measure used to determine the progress toward completion in long-term contracts is the cost-to-cost basis.

True

Under the installment-sales method, companies defer revenue and income recognition until the period of cash collection.

False

A loss in the current period on a profitable contract must be recognized under both the percentage-of-completion and completed-contract method.

False

Companies must recognize the entire expected loss on an unprofitable contract in the current period under the percentage-of-completion method but not the completed-contract method.

False

Companies should recognize revenue when it is realized and when cash is received.

False

If a company sells its product but gives the buyer the right to return it, the company should not recognize revenue until the sale is collected.

False

Once the separate units of accounting are determined under multiple-deliverable arrangement, the amount paid for the arrangement is allocated among the separate units based on cost of manufacturing the separate unit.

False

The Construction in Process account includes only construction costs under the percentage-of-completion method.

False

The provision for a loss on an unprofitable contract may be combined with the Construction in Process account balance under percentage-of-completion but not completed-contract.

False

Under the completed-contract method, companies recognize costs only when the contract is completed.

False

Under the cost-recovery method, a company recognizes no revenue until cash payments by the buyer exceed the cost of the merchandise sold.

False

Companies can recognize revenue prior to completion and delivery of the product under certain circumstances.

True

Companies recognize profit under the cost-recovery method only when cash collections exceed the total cost of the goods sold.

True

Deferred gross profit is generally treated as unearned revenue and classified as a current liability under the installment-sales method.

True

If the difference between the Construction in Process and the Billings on Construction in Process account balances is a debit, the difference is reported as a current asset.

True

Revenues are realized when a company exchanges goods and services for cash or claims to cash.

True