A company’s projects extend over several years and collection of receivables is reasonably certain. Each of...
A company’s projects extend over several years and collection of receivables is reasonably certain. Each of its projects has a contract that specifies a price, and reliable estimates can be made of the extent of progress and cost to complete each project.
The method that the company should use to account for construction revenue is the:
Question 11 options:
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Completed-contract method |
|
|
Sales method |
|
|
Installment method |
|
|
Cost-to-cost method |
Homework Answers
Option A Completed Contract method is the correct answer.
GAAPs allow completed contract method to account for the projects with the following characteristics:
'i. The project is long-term
ii. Collection of receivables is reasonably certain
iii. Having a contract which specifies price
iv. Possibility to make reliable estimates about completion and cost as the project progresses
The remaining options are wrong becasue the project with specified charecterstics are different form the given.
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