Question

Under the completed contract method of accounting for long-term construction contracts, interim charges and/or credits to the income statement are made for:

1) Only the costs incurred to date
2) Only the estimated costs to complete the contract
3) Both the costs incurred to date and the estimated costs to complete the contract
4) None of the above

Answer 1

Under the completed contract method of accounting for long-term construction contracts, both the costs incurred to date and the estimated costs to complete the contract are considered for interim charges and/or credits to the income statement.

Step-by-step explanation:

Under the completed contract method of accounting for long-term construction contracts, interim charges and/or credits to the income statement are made for both the costs incurred to date and the estimated costs to complete the contract. This method recognizes revenue and expenses when the project is completed rather than recognizing them as the work progresses. It is commonly used when there is uncertainty about the final outcome of the project.