Question

The percentage-of-completion method

A) recognizes revenue and gross profit each period based upon progress.
B) recognizes revenue and gross profits only when contract is completed.
C) accumulates construction costs in the Billings on Construction in Progress account.
D) is used primarily for short-term contracts.

Answer 1

The percentage-of-completion method recognizes revenue and gross profit based on progress and accumulates construction costs in a specific account. It is used for long-term contracts.

Step-by-step explanation:

The percentage-of-completion method recognizes revenue and gross profit each period based upon progress. This means that revenue and gross profit are recognized as work is being completed, even if the contract is not fully finished. The method accumulates construction costs in the Billings on Construction in Progress account. It is used for long-term contracts, not primarily for short-term contracts.