For long-term construction contracts, when there is not assurance that the buyer can be expected to satisfy its obligations under a contract, which of the following revenue recognition methods is preferable?
A) percentage-of-completion method
B) installment method
C) deferral method
D) completed-contract method

Question

Quizplus · Accepted Answer

The completed-contract method is the best choice for long-term construction contracts when there is uncertainty regarding the buyer's ability to satisfy their obligations. This is because revenue is only recognized upon completion of the contract, reducing the risk of recognizing revenue that may not be collected. This method also allows for more accurate matching of expenses with revenue.

For Long-Term Construction Contracts, When There Is Not Assurance That