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Income Recognition - Chapter 4 "The Book" Study Questions

Key Concepts:

Terms in this set (10)

In 1981 the AICPA issued a new Audit and Accounting Guide, "Construction Contractors". Simultaneously, the AICPA issued a statement of Position 81-1 now known as:

Percentage of completion method

Of the two GAAP acceptable methods for income recognition, which one is more preferred?

Completed Contract Method

Which one of the following is an Acceptable income recognition methods in accordance with GAAP

Revenue, costs and gross profit are recognized in all accounting periods throughout the duration of the contract

Which income recognition method is considered the Percentage of Completion method?

Cash basis, Accrual (billing), Hybrid Basis

These methods are only acceptable for financial reporting in conformity with GAAP and not for revenue recognition

Completed contract method when contract is substantially completed and accepted

Revenue, costs and gross profits, when not recognized until the contract has been substantially completed and accepted is considered which income recognition method?

reasonably dependable estimates of revenue, costs and progress toward completion

To use the percentage of completion method, a contractor must be able to provide:

Cost to Cost method, Efforts expended method, Units of work performed method

Accepted Methods of measuring the extent of progress toward completion for percentage of completion

Completed contract Method

Accepted method of income recognition GAAP

Normally, the completed contract method is only used when_______________ associated with the contract preclude the contractor's ability to reasonably estimate contract revenues, costs or gross profit.

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