The completed contract method for accounting for long-term construction projects requires that
A) no revenue is recognized until the project is completed.
B) costs are accumulated and revenue is recognized in proportion to cash collected.
C) gross profit is calculated each period, but deferred until the end of the contract.
D) revenue is calculated each period, but deferred until the end of the contract.

Question

Quizplus · Accepted Answer

The completed contract method requires that no revenue is recognized until the project is completed. All costs associated with the construction are accumulated during the project, and revenue and gross profit are recognized only when the project is complete. This method is commonly used for long-term construction projects where it is difficult to estimate the final outcome of the project.

The Completed Contract Method for Accounting for Long-Term Construction Projects