The principle disadvantage of using the percentage-of-completion method of recognizing revenue from long-term construction contracts is that it:
A) May require that inter-period tax allocation procedures be used.
B) is likely to assign a small amount of revenue to a period during which much revenue actually was earned.
C) is unacceptable for tax purposes.
D) Gives results based upon estimates, which may be subject to considerable uncertainty.

Question

Quizplus · Accepted Answer

The percentage-of-completion method relies on estimates for both costs and progress towards completion, which can result in uncertainty and possible misstatements of revenue. This can be a disadvantage of the method.

The Principle Disadvantage of Using the Percentage-Of-Completion Method of Recognizing