Answered: If the outcome of a long-term contract…

If the outcome of a long-term contract can be measured reliably, the preferred accounting method under both IFRS and US GAAP is: A . the cost recovery method.

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter8: Revenue Recognition, Receivables, And Advances From Customers

Section: Chapter Questions

Problem 3Q

See similar textbooks

Related questions

Q: t contract inception, PFRS 15 requires an entity to determine how the performance obligations…

A: Contract is a legal document or agreement between the two parties with their mutual obligation.

Q: If a contract modification adds distinct goods or services and the contract price increases by an…

A: Any modification in the price or scope or both with regard to a contract by the parties to the…

Q: The contract rate is above the market rate. The contract rate is equal to the market rate.

A: The correct answer is option (a) The contract rate is above the market rate.

Q: Demonstrate revenue recognition for long-term contracts, both at a point intime when the contract is…

A: Long term contracts usually qualify for revenue recognition over time. We recognise revenue over…

Q: Which of the following costs shall from part of contract costs of long-term construction contract?…

A: Following is the answer to the given question

Q: The fair value of a liability is defined as: a. the appraised value of the liability. b. the price…

A: The fair value of a liability is defined as the amount that would be paid when transferring a…

Q: f the Construction in Progress account is greater than the Contract Billings, the excess is treated…

A: Construction in progress means the contracts' work which still going on and is yet to be completed.

Q: Explain how purchase commitments are recorded for the lower of contract price or market price.

Q: (Based on Appendix 9) Explain how purchase commitments are recorded for the lower of contract price…

Q: Which of the following statements is not applicable to contract acquisition costs under ASC Topic…

A: In the given case all of the following statements is applicable to contract acquisition costs under…

Q: When it is probable that total contract costs will exceed total contract revenue, how shall the…

A: SOLUTION CONTRACT COST IS THE TRACKING OF COSTS ASSOCIATED WITH A SPECIFIC CONTRACT WITH A CUSTOMER…

Q: If the outcome of a long-term contract can be measured reliably, the preferred accounting method…

A: The percentage of completion method is an accounting technique in which long-term deed income and…

Q: I. PFRS 15 provides that where a contract with a customer has multiple performance obligations, an…

A: As per PFRS 15 revenue from contract with customers, it is based on 5 step model. Identify the…

Q: Which statement is true when the outcome of construction contract cannot be estimated reliably?…

A: As per AS-7, the accounting treatment of construction contract with respect to recognition of…

Q: For what reasons should the percentage-of-completionmethod be used over the completed-contract…

A: Completed contract method: In this method the revenue and profit are recognized only after the…

Q: In accounting for a long-term construction contract using the percentage of completion method, the…

A: Percentage of completion method requires reporting of revenue and expenses period by period basis.

Q: Any anticipated loss should be recognized * A.on a percentage basis during the contract period B.…

A: The amount of anticipated loss is calculated regardless of: (a) whether or not work on the contract…

Q: Under PFRS 15, how does a consignor satisfy its performance obligation under consignment contract?…

A: SOLUTION- EXPLANATION- A PERFORMANCE OBLIGATION IS SATISFIED BY TRANSFERRING A PROMISED GOOD OR…

Q: age of time B. Completion of percentage of a project C. Performan

A: Revenue refers to the sum value of money gained by a business by selling its goods or services in…

Q: Describe Short-Term Obligations Are Expected to Be Refinanced.

A: Refinancing refers to the process where revival of interest rate, payment schedule and terms of…

Q: a) In your own words, explain how do we account for service costs included within a contract to…

A: Disclaimer: “Since you have asked multiple question, we will solve the first question for you. If…

Q: When the outcome of a construction contract cannot be estimated reliably, how shall contract revenue…

A: when the outcome of a construction contract can be estimated reliably, contract revenue and contract…

Q: Partial satisfaction of a multiple performance obligation is reported on the balance sheet asa.…

A: Performance obligation: A performance obligation is a promise made by a seller to transfer the goods…

Q: What are the two types of losses that can become evidentin accounting for long-term contracts? What…

A: The two types of losses that can become evident while accounting for long-term contracts are:(1) A…

Q: When outcome of a construction contract is estimated reliably, contract revenue and contract costs…

A: Solution: As per IAS 11, "when the outcome of a construction contract can be estimated reliably,…

Q: The cost-plus approach: a. refers to contracts that are modified from their original terms…

A: Cost plus contract means a contract in which buyer agrees to pay the contractor all the Cost plus a…

Q: Determine whether a contract exists, and whether some frequently encounteredfeatures of contracts…

A: A contract exists when it has commercial substance and all parties to the contract are committed to…

Q: How does a seller allocate a transaction price to a contract’s performance obligations?

A: Transaction price: Transaction price is the amount of consideration that is estimated by the company…

Q: Under IFRS 15, when shall the incremental cost of obtaining a contract with a customer be recognized…

A: IFRS (International financial reporting standards) refer to a set of accounting guidelines and rules…

Q: Explain how to account for revenue on a long-term contract over time as opposed to at a point in…

A: The revenue recognition principle: The revenue recognition principle refers to the revenue that…

Q: What are the two basic methods of accounting for long term construction contracts? Indicate the…

A: Explain the two basic methods of accounting for long term construction contracts: The two basic…

Q: What is a repurchase agreement (product financing)arrangement? How should a product repurchase…

Q: If the outcome of a long-term contract can be measured reliably, the preferred accounting method…

A: Long term contracts are those contracts which are related to construction of building. Usually long…

Q: When it is probable that total contract costs will exceed total contract revenue, how shall it be…

A: Contract account is prepared when the work to be done take substantial time to make (generally more…

Q: Explain the reporting for (a) costs to fulfill a contract and (b) collectibility.

A: Fulfillment costs are divided into two categories: (1) Those that arise from assets; (2) Those that…

Q: If a contract modification does not create a separate contract, it is accounted for using either a…

A: The correct answer is “either a cumulative catch-up adjustment or a prospective approach”.

Q: . Which of the following may not be equal to the contract rate of interest? a. stated rate b.…

A: Contract rate of interest is the defined rate of interest on bonds, notes or loan.

Q: 33. Entity A enter into a long-term contract to provide service. The outcome of the transaction can…

A: Long term contract of service are those contracts in which there is an agreement between two parties…

Q: Assuming the requirements for recognizing revenue over time are met, the profit to be recognized in…

A: Under construction contract, the profit is recognised on the basis of the costs incurred during the…

Q: Which of the following journal entries is not made in the first period of a long-term contract if…

A: In case of long term contract , we can show proportionate profit every year depending on following…

Q: This method of accounting for long-term contracts has the advantage of recognizing project income…

A: Solution: Percentage of completion method of accounting for long term contracts has the advantage of…

Q: When percentage-of-completion accounting is not appropriate, U.S. GAAP requires the use of the…

Concept explainers

Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.

Question

If the outcome of a long-term contract can be measured reliably, the preferred accounting method under both IFRS and US GAAP is: A . the cost recovery method.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

If the outcome of a long-term contract can be measured reliably, the preferred accounting method under both IFRS and US GAAP is: B . the completed contract method
Revenue Recognization Question. What is the significant difference between the Contract-Based Approach (IFRS) and Earnings Approach (ASPE)? Please provide an example for each for a better understanding.
Under PFRS 15, what is the measurement basis of revenue from contracts with customers? Select the correct letter: A. Revocable amount of the consideration received or receivable B. Book value of the consideration received or receivable C. Fair value of the consideration received or receivable D. Historical cost of the consideration received or receivable
Explain the reporting for (a) costs to fulfill a contract and (b) collectibility.
When is an estimated loss on a long-term contract recognized, both for contracts that recognize revenue over time and those that recognize revenue at the point in time the contract is completed?
Any anticipated loss should be recognized * A.on a percentage basis during the contract period B. when all costs are recognized C.in the future D.in the period it is determined
What are the two types of losses that can become evidentin accounting for long-term contracts? What is the natureof each type of loss? How is each type accounted for?
What is a repurchase agreement (product financing)arrangement? How should a product repurchase agreementbe reported in the financial statements?
33. Entity A enter into a long-term contract to provide service. The outcome of the transaction can be estimated reliably and the progress on the contract can be measured with sufficient reliability. According to PPSAS, how should entity A recognize revenue from the contract? On a straight-line basis over the contract term By reference to the stage of completion of the contract at the reporting date Full recognition of contract price upon completion of the contract Only to the extent of costs that are expected to be recovered.
If the Construction in Progress account is greater than the Contract Billings, the excess is treated as * A. current liability B. current asset C. loss D.income
When it is probable that total contract costs will exceed total contract revenue, how shall the long-term contractor account for the difference? The expected loss shall be recognized as an expense taking into account the percentage of completion as of the end of the period. The expected profit shall be recognized as a profit immediately. The expected loss shall be recognized as a profit taking into account the percentage of completion as of the end of the period. The expected loss shall be recognized as an expense immediately
Describe Short-Term Obligations Are Expected to Be Refinanced.