Question

Which of the following revenue recognition methods can be used by long-term construction companies in most circumstances?

I. Percentage of Completion Method
II. Completed Contract Method
III. Both I and II
IV. Neither I nor II

Answer 1

Long-term construction companies can use both the Percentage of Completion Method and the Completed Contract Method for revenue recognition.

Step-by-step explanation:

The correct answer is III. Both I and II. Long-term construction companies can use both the Percentage of Completion Method and the Completed Contract Method for revenue recognition.

The Percentage of Completion Method recognizes revenue as work progresses based on the percentage of the project completed. This method can be used when there is a reasonable estimate of the stage of completion and the collectability of the revenue is reasonably assured.

The Completed Contract Method, on the other hand, recognizes revenue only when the project is completed. This method is used when the percentage of completion cannot be reasonably estimated or when collectability is not reasonably assured.