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Flashcards in Long-Term Construction Contracts Deck (21):
1

What accounting standards use completed contract method?

US GAAP only

2

What contract method recognizes income only on completion (or substantial completion) of the contract?

Completed contract method

3

The excess of accumulated costs over related billings should be reflected in the balance sheet as?

Current asset

4

The excess of accumulated billings over related costs should be reflected as?

Current liability

5

What are the account names representing the same contract asset and should be shown net of their related contra accounts?

Progress billings and construction in progress

6

What are 2 names of current asset accounts?

Due on accounts receivable and cost of uncompleted contracts in excess of progress billings

7

What is an account name for a current liability account?

Progress billings on uncompleted contracts in excess of cost

8

Where should applicable overhead and direct costs be charged to in the completed contract method?

Construction in progress account

9

Where should billings and/or cash received be credited to?

Advances on construction in progress account(liability)

10

Why is the excess of either the construction in progress account or the advances account over the other is classified as current?

The current operating cycle concept

11

When should losses be recognized?

In full when discovered

12

What rule is used when recognizing losses when discovered?

Rule of conservatism

13

Is the completed contract method permitted under IFRS?

No

14

What method is used under IFRS?

Percentage of completion method

15

When should a provision for the loss on the entire contract be made?

When current estimates of the total contract costs indicate a loss

16

What rule is used for the provision of recognizing losses in the percentage of completion method?

Rule of conservatism

17

What are the 2 account names of current assets in the percentage of completion method?

Due on accounts receivable and costs and estimated earnings of uncompleted contracts in excess of progress billings

18

What is the account name of current liability under the percentage of completion contract?

Progress billings in excess of cost and estimated earnings on uncompleted contracts

19

What are the steps to accounting for the percentage of completion method?

Step 1: Contract price - Estimated total cost = Gross profit, Step 2: Total cost to date/Total estimated cost of contract, Step 3: Step 1 x Step 2 = PTD, Step 4: PTD at current YE - PTD at beginnin of period = Current year to date GP

20

How should a change in construction method be reported?

Retrospectively

21

How to calculate current asset or liability?

Cumulative costs incurred + recognized gross profit - cumulative billings