When percentage-of-completion accounting is not appropriate, U.S. GAAP requires the use of the completedcontract method, while IFRS requires the use of the cost recovery method. Explain how the two methods affectrecognition of revenue, cost of construction, and gross profit over the life of a profitable contract.

Q: A method of reporting income that is used when collection can be made over a relatively long periods…

A: Income refers to the revenue which is earned through business from selling the goods and services.

Q: Based on the requirements and guidance of IFRS 15, one of the following is not considered part of…

A: Under the contract costing, there is an agreement made between two parties in respect of performing…

Q: Demonstrate revenue recognition for long-term contracts, both at a point intime when the contract is…

A: Long term contracts usually qualify for revenue recognition over time. We recognise revenue over…

Q: The primary issue in the accounting for construction contracts is   the determination of the…

A: Construction contract:     It is the contract between the parties that include all details of…

Q: Which of the following costs shall from part of contract costs of long-term construction contract?…

A: Following is the answer to the given question

Q: f the Construction in Progress account is greater than the Contract Billings, the excess is treated…

A: Construction in progress means the contracts' work which still going on and is yet to be completed.

Q: Explain the difference in the accounting treatment of costs incurred to purchaseintangible assets…

A:

Q: Choose the correct.For which of the following does IFRS for SMEs not provide a simplification of…

A:

Q: Which one of the following accounts is an asset similar to work-in-process inventory? Group of…

A: An asset refers to the resource of the business that can be utilized for the purpose of revenue…

Q: When it is probable that total contract costs will exceed total contract revenue, how shall the…

A: SOLUTION CONTRACT COST IS THE TRACKING OF  COSTS ASSOCIATED WITH A SPECIFIC CONTRACT WITH A CUSTOMER…

Q: If the outcome of a long-term contract can be measured reliably, the preferred accounting method…

A: The percentage of completion method is an accounting technique in which long-term deed income and…

Q: This cost is associated with the contracts and non-competes necessary to retain talents. Tax Shield…

A: A non-compete contract is a legally enforceable contract. It is a contract  between the company and…

Q: In accounting for a long-term construction contract using the percentage of completion method, the…

A: Percentage of completion method requires reporting of revenue and expenses period by period basis.

Q: Any anticipated loss should be recognized * A.on a percentage basis during the contract period B.…

A: The amount of anticipated loss is calculated regardless of: (a) whether or not work on the contract…

Q: age of time B. Completion of percentage of a project C. Performan

A: Revenue refers to the sum value of money gained by a business by selling its goods or services in…

Q: Which of the following is an essential step in the case of cost/income equivalents for comparing…

A: In financial analysis there is need of comparisons between machines to select most economically…

Q: When the outcome of a construction contract cannot be estimated reliably, how shall contract revenue…

A: when the outcome of a construction contract can be estimated reliably, contract revenue and contract…

Q: . Must be expensed in the period incurred unless it can be clearly demonstrated that the expenditure…

A: IASB stands for International Accounting Standards Board and helps in the preparation and issuance…

Q: When a contract contains more than one performance obligation, the seller allocates the transaction…

A: Contract: A contract is a legal agreement among two or several parties to perform some task and…

Q: When outcome of a construction contract is estimated reliably, contract revenue and contract costs…

A: Solution: As per IAS 11, "when the outcome of a construction contract can be estimated reliably,…

Q: The cost-plus approach:   a. refers to contracts that are modified from their original terms…

A: Cost plus contract means a contract in which buyer agrees to pay the  contractor all the Cost plus a…

Q: What two methods are identified in the Codification as appropriate in accounting for long-term…

A: Long term Construction Contract Construction contract are in different type in accordance with need…

Q: In light of your study of the main conditions mentioned in the definition, mention why are or are…

A: An asset is a resource with the financial worth that an individual, enterprise, or nation possesses…

Q: Under IFRS 15, when shall the incremental cost of obtaining a contract with a customer be recognized…

A: IFRS (International financial reporting standards) refer to a set of accounting guidelines and rules…

Q: Which of the following shall be excluded in the contract costs of a construction contract? * A.…

A: Contract costs should comprise:(a) costs that relate directly to the specific contract;(b) costs…

Q: Explain how to account for revenue on a long-term contract over time as opposed to at a point in…

A: The revenue recognition principle: The revenue recognition principle refers to the revenue that…

Q: When it is probable that total contract costs will exceed total contract revenue, how shall the…

A: IAS 11 prescribes the contractor’s accounting treatment of revenue and costs associated with…

Q: What are the two basic methods of accounting for long term construction contracts? Indicate the…

A: Explain the two basic methods of accounting for long term construction contracts: The two basic…

Q: If the outcome of a long-term contract can be measured reliably, the preferred accounting method…

A: Long term contracts are those contracts which are related to construction of building. Usually long…

Q: Which of the following statements is not correct? * Administration and other general overhead cost…

A: The administration expense and the general expenses includes the operating expenses of the company.…

Q: The general rule in the accounting treatment of research and development costs is    A. Capitalize…

A: This question deals with the IAS 38 "Intangible Asset". As per accounting standard, intangible asset…

Q: The first step in determining goodwill impairment involves comparing the * implied value of a…

A: Goodwill is an intangible asset. Mostly, it is recognized by the company when one company purchases…

Q: investment decision? A. revenue recognition B. goodwill C. plant, property and…

A: Step 1 The main difference between the two systems is that GAAP is based on principles, while IFRS…

Q: Which of the following is not a retrospective-type accounting change? A. Cost recovery method to…

A: Answer is option D) D. Percent of sales method to aging method in recognizing doubtful accounts.…

Q: Assuming the requirements for recognizing revenue over time are met, the profit to be recognized in…

A: Under construction contract, the profit is recognised on the basis of the costs incurred during the…

Q: Which of the following journal entries is not made in the first period of a long-term contract if…

A: In case of long term contract , we can show proportionate profit every year depending on following…

Q: Which of these statements is true?      a. The matching concept requires that we distinguish between…

A: The matching principle is an accounting principle that states that the expenses and revenue of a…

Q: If the outcome of a long-term contract can be measured reliably, the preferred accounting method…

A: The percentage of completion method is an accounting technique in which long-term deed income and…

Q: This method of accounting for long-term contracts has the advantage of recognizing project income…

A: Solution: Percentage of completion method of accounting for long term contracts has the advantage of…

Q: For contracts which are very near to completion, the profit is ascertained by the formula-

A: Every contract takes 2 to 5 years to complete. Actual profit can be calculated at the end of…

Q: A. an agreement between a private sector entity and a contractor for the supply of goods or services…

A: Contractor  A contractor can be an individual or a company that will undertake to do specific work…

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.