how long-term construction contract are accounted for and some of the issues that are faced for financial reporting purposes.
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how long-term construction contract are accounted for and some of the issues that are faced for financial reporting purposes.
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- What are the two basic methods of accounting for long term construction contracts? Indicate the circumstances that determine when one or the other of these methods should be used.When the outcome of a construction contract cannot be estimated reliably, how shall contract revenue and contract costs associated with the construction contract be recognized? Group of answer choices They shall be recognized as revenue and expenses respectively by reference to the state of completion of the contract activity at the end of the reporting period also known as by percentage of completion method. They shall be recognized as revenue and expenses respectively by the date of earning of revenue or incurring of expenses also known as accrual method. They shall be recognized as revenue and expenses respectively by reference to the percentage of collection of receivables from customers also known as by installment method. Revenue shall be recognized only to the extent of contract cost incurred that is probable will be recoverable and the contract cost shall be recognized as an expense in the period in which there are incurred also known as cost recovery or zero-profit…David Mendez Under the percentage-of-completion method, how should the balances of progress billings and construction in process be disclosed in the financial statements prior to the completion of the contract? net, as income from construction if a credit balance, and loss from construction if a debit balance progress billings as deferred income, construction in progress as a deferred expense net, as a current asset if a debit balance, and a current liability if a credit balance progress billings as income, construction in process as inventory
- The primary issue in the accounting for construction contracts is the determination of the percentage of completion and revenue to be recognized during the period. the allocation of contract revenue and contract costs to the accounting periods in which construction work is performed. the determination of the rate at which physical performance has been made during the reporting period and the future performance on which future revenues will be allocated. the allocation of costs of a long-lived asset to permit the proper matching of costs with revenues.Describe the conditions when contract assets and liabilitiesare recognized and presented in financial statements.Periodic billings to the customer for a long-term construction contract are recorded as billings on constructioncontract. How is this account reported in the balance sheet?
- For long-term construction projects, the amount of “billings” is reported in the balance sheet by: Multiple Choice netting it against “construction in progress.” adding it to “construction in progress.” adding it to “accounts receivable.” netting it against “accounts receivable.”Distinguish between the revenue/expense and the asset/liability approaches to setting financial reportingstandardsWhat two methods are identified in the Codification as appropriate in accounting for long-term construction contracts? Where in the Codification did you find this information?
- Understand the disclosures required for revenue recognition, accounts receivable,contract assets, and contract liabilitiesIn accounting for a long-term construction contract using the percentage of completion method, the progress billings on contract account is a * A. noncurrent liability B. revenue account C. contra noncurrent liability D.contra current asset accountDescribe the relationship between expense recognition and long-term assets.
