Under the percentage-of-completion method of revenue recognition,the percentage-of-completion ratio is computed by dividing
A)profits earned to date by estimated total profits.
B)costs incurred to date by estimated total costs.
C)costs incurred to date by the contract price.
D)profits earned to date by the contract price.

Question

Quizplus · Accepted Answer

The percentage-of-completion ratio is computed by dividing costs incurred to date by estimated total costs. This ratio is used to determine the amount of revenue that can be recognized based on the level of completion of the project. By dividing costs incurred to date by estimated total costs, the company can determine the percentage of the project that has been completed and recognize revenue accordingly.

Under the Percentage-Of-Completion Method of Revenue Recognition,the Percentage-Of-Completion Ratio Is