Question

The principal advantage of the completed-contract method is that

A) it is not necessary to recognize revenue at the point of sale.
B) a greater amount of gross profit and net income is reported than is the case when the percentage-of-completion method is used.
C) reported revenue is based on final results rather than estimates of unperformed work.
D) it reflects current performance when the period of a contract extends into more than one accounting period.

Answer 1

The principal advantage of the completed-contract method is that reported revenue is based on final results rather than estimates of unperformed work.

Step-by-step explanation:

The principal advantage of the completed-contract method is that reported revenue is based on final results rather than estimates of unperformed work. The completed-contract method is a method of accounting for long-term construction contracts where revenue and expenses are recognized only when the project is completed. This method provides a more accurate representation of the financial results of a contract that extends into multiple accounting periods.