Dilla Construction Company's projects extend over several years and collection of receivables is reasonably certain. Each project has a contract that specifies a price and the rights and obligations of all parties. Both the contractor and the customer are expected to fulfill their contractual obligations on each project. 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
A) installment sales.
B) percentage-of-completion.
C) completed-contract.
D) cost recovery.

Question

Quizplus · Accepted Answer

The best method for Dilla Construction Company to account for construction revenue is percentage-of-completion. This method recognizes revenue and expenses based on the extent of progress towards completion of the project. This is the most appropriate method for long-term projects where reliable estimates can be made of the extent of progress and cost to complete each project.

Dilla Construction Company's Projects Extend Over Several Years and Collection