[NinaSun]

Which of the following statements concerning the accounting for long-term construction contracts is/are incorrect?

I. The completed contract method is based on the revenue recognition principle, while the percentage of completion method is based on the matching principle

II. Under the completed contract method, gains and losses are recognized only when the contract is completed

III. The construction in progress account generally has a higher balance when the percentage of completion method is used

IV. When the percentage of completion method is used, profit is recognized based on the ratio of current year costs to total estimated cost

a. I only

b. II, III, and IV

c. II and IV

d. I and III

The answer is “c”. I wandering why III is correct?

AUD-74,75 11/2014
REG-80 04/2015
FAR-74, 91 11/2015
BEC-79 08/2015