Under the completed contract method:
A) revenue and cost are recognized during the production cycle, but gross profit recognition is deferred until the contract is completed.
B) revenue, cost, and gross profit are recognized during the production cycle.
C) revenue, cost, and gross profit are recognized at the time the contract is completed.
D) None of these are correct.

Question

Quizplus · Accepted Answer

Under the completed contract method, revenue, cost, and gross profit are recognized at the time the contract is completed. This method defers revenue and cost recognition until the completion of the contract, and therefore gross profit is also deferred until that time. This method is commonly used in long-term projects where the outcome is uncertain or hard to estimate.

Under the Completed Contract Method