Question:
Which of the following statements regarding the percentage-of-completion method of accounting is
FALSE?
The construction-in-progress account:
a. is shown net of advance billings as a liability if the amount is less than the amount of advance billings.
b. is an asset.
c. is shown net of advance billings on the balance sheet.
d. does not include the cumulative effect of gross profit recognition.
Answer:
d. Construction-in-progress represents the costs incurred plus the cumulative pro-rata share of gross
profit under the percentage-of-completion method of accounting.
Which of the following statements regarding the percentage-of-completion method of accounting is
FALSE?
The construction-in-progress account:
a. is shown net of advance billings as a liability if the amount is less than the amount of advance billings.
b. is an asset.
c. is shown net of advance billings on the balance sheet.
d. does not include the cumulative effect of gross profit recognition.
Answer:
d. Construction-in-progress represents the costs incurred plus the cumulative pro-rata share of gross
profit under the percentage-of-completion method of accounting.
