Which statement best explains the cost recovery method?
A)An accounting method that recognizes revenue and expenses on a contract only after it is completed.
B)An accounting method that recognizes revenue and expenses on a contract in proportion to the degree of progress.
C)An accounting method that recognizes contract costs as incurred and an amount of revenue equal to the costs that are expected to be recovered on the contract.
D)An accounting method that recognizes revenue and expenses based on the fair value of the contract.

Question

Quizplus · Accepted Answer

The cost recovery method recognizes contract costs as incurred and an amount of revenue equal to the costs that are expected to be recovered on the contract. This method is typically used when it is uncertain whether the contract will generate a profit, and revenue recognition is delayed until the costs are recovered.

Which Statement Best Explains the Cost Recovery Method