Question

In accounting for a long-term construction-type contract using the percentage-of-completion method, the gross profit recognized during the first year would be the
estimated total gross profit from the contract, multiplied by the percentage of thecosts incurred during the year to thea.total costs incurred to date.b.total estimated cost.c.unbilled portion of the contract price.d.total contract price.36.How should earned but unbilled revenues at the balance sheet date on a long-termconstruction contract be disclosed if the percentage-of-completion method of revenuerecognition is used?W

Answer 1

Answer:

D.Total contract price

Explanation:

The disclosure of earned but unbilled revenues under percentage -of-completion is the same as the treatment given to same item under completion method of measuring contract revenue.

In any case such unbilled revenue is classed is shown as contract work in progress and shown as current asset in the balance sheet.

Answer 2

In percentage completion method, gross profit during the first year is estimated gross profit multiplied by percentage of costs incurred to the total estimated cost.

What is the Percentage Completion Method?

Percentage completion method is a recognized cash accounting concept that assesses the method of periodic earnings between a long-term project or contract.

Revenue, expenses, and profits are all recognized on an individual basis based on the percentage of work completed or the costs incurred.

Disclosure of earned but unbilled revenues in the percentage of completion is the same as the administration given to the same item under the final method of measuring contract revenue.

In any unbilled revenue is classified as a contract work in progress and is recognized as a current asset in the balance sheet.

Thus, Option B is the correct answer and unbilled revenue is recognized as a current asset in the balance sheet.

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