28689020-p2-Accounting-for-Long-term-Construction-Project -...

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ACCOUNTING FOR LONG-TERM CONSTRUCTION PROJECT 8. In selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be a. the terms of payment in the contract. b . the degree to which a reliable estimate of the costs to complete and extent of progress toward completion is practicable. c. the method commonly used by the contractor to account for other long-term construction contracts. d. the inherent nature of the contractor's technical facilities used in construction. K, W & W PERCENTAGE OF COMPLETION METHOD Basic Concepts *. The use of the percentage of completion method of accounting for long term construction contracts is a measurement of revenue under the a. Cost principle. c. Objectivity principle. b . Realization principle. d. Monetary principle. RPCPA 1079 Criteria 10. When work to be done and costs to be incurred on a long-term contract can be estimated dependably, which of the following methods of revenue recognition is preferable? a. Installment method c. Completed-contract method b . Percentage-of-completion method d. None of these K, W & W 15. Which of the following is not an element identified by the AICPA as being necessary in order to use percentage-of-completion accounting? a . The construction period can be reasonably estimated. b. The buyer can be expected to satisfy obligations under the contract. c. Dependable estimates can be made of the extent of progress toward completion. d. Dependable estimates can be made of contract costs. S, S & S 9. The profession requires that the percentage-of-completion method be used when certain conditions exist. Which of the following is not one of those necessary conditions? a. Estimates of progress toward completion, revenues, and costs are reasonably dependable. b. The contractor can be expected to perform the contractual obligation. c . The buyer can be expected to satisfy some of the obligations under the contract. d. The contract clearly specifies the enforceable rights of the parties, the consideration to be exchanged, and the manner and terms of settlement. K, W & W Characteristics 45. The rationale for adoption of the percentage-of-completion method is that: A. Results are more conservative. B . It provides a measure of periodic accomplishment. C. It is a better match with legal ownership. D. It results in a lower income tax. S, S & T *. The percentage-of-completion method of inventory valuation of long-term contracts a. Recognizes income upon completion of work. b. Recognizes income based on collected billings. c . Recognizes income based on the progress of work. d. Does not recognize income at the balance sheet date. RPCPA 1074 46. The accounting method that recognizes revenue prior to the point of sale based on either an input or an output measure of the earning process is known as the a. Deposit method. c. Installment sales method. b. Cost recovery method.
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This note was uploaded on 08/12/2010 for the course ACC 452 taught by Professor Mr.cula during the Spring '10 term at Abraham Baldwin Agricultural College.

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28689020-p2-Accounting-for-Long-term-Construction-Project -...

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