The percentage-of-completion method of accounting for long-term construction-type contracts is preferable when:
A) A contractor is involved in numerous projects.
B) The contracts are of a relatively short duration.
C) The collectability of progress billings from the customer is reasonably assured.
D) Estimates of costs to complete and extent of progress toward completion are reasonably dependable.

Question

Quizplus · Accepted Answer

The percentage-of-completion method of accounting for long-term construction-type contracts is preferable when estimates of costs to complete and extent of progress toward completion are reasonably dependable. This method recognizes revenue and costs based on the percentage of work completed, which requires reliable estimates of both costs and progress. Options A and B are not relevant to the choice of accounting method for long-term contracts, while option C relates to the collectability of progress billings and is not directly related to the choice of accounting method.

The Percentage-Of-Completion Method of Accounting for Long-Term Construction-Type Contracts Is