Widjaja Company is accounting for a long-term construction contract using percentage-of-completion method. It is a 4-year contract that is currently in its second year. The latest estimates of total contract costs indicate that the contract will be completed at a loss to Widjaja Company.

a. What theoretical justification is there for Widjaja Company's use of the percentage-of-completion method?

b. How would the company account for the projected loss?