In accounting for long-term contracts (those taking longer than one year to complete), the two methods commonly

Question:

In accounting for long-term contracts (those taking longer than one year to complete), the two methods commonly followed are the percentage-of completion method and the completed-contract method.
Required
1. Explain how earnings on long-term contracts are recognized and computed under these two methods.
2. Under what circumstances is it preferable to use one method over the other?
3. Why is earnings recognition as measured by interim billings not generally accepted for long-term contracts?
4. How are job costs and interim billings reflected on the under the percentage-of-completion method and the completed-contract method?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...