Under the earnings approach in accounting for a long-term construction-type contract using the percentage-of-completion method, the gross profit recognized during the first year would be the estimated total gross profit from the contract, multiplied by the percentage of the costs incurred during the year to the
A)total costs incurred to date.
B)total estimated cost.
C)unbilled portion of the contract price.
D)total contract price.

Question

Quizplus · Accepted Answer

The percentage-of-completion method recognizes revenue based on the proportion of costs incurred to date compared to the total estimated costs. Therefore, the gross profit recognized is the estimated total gross profit multiplied by the percentage of costs incurred to the total estimated cost.

Under the Earnings Approach in Accounting for a Long-Term Construction-Type