Generally Accepted Accounting Principles state that revenue must be recognized in the period in which it is earned. Hence for long-term projects, the use of the percentage completion method is mandatory. However, this rule does not apply to projects that will be completed within 2 years and to contractors with gross receipts not exceeding $25 million in the preceding 3 years. In addition, the project must fulfill the following conditions: Payment for the work will be received. Reasonable estimates of costs or percentage of completion are possible. The percentage of completion and the amount to accrue.

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Chapter 3, Problem 3.1CTFC

1.

To determine

Introduction: Generally Accepted Accounting Principles state that revenue must be recognized in the period in which it is earned. Hence for long-term projects, the use of the percentage completion method is mandatory. However, this rule does not apply to projects that will be completed within 2 years and to contractors with gross receipts not exceeding $25 million in the preceding 3 years. In addition, the project must fulfill the following conditions:

Payment for the work will be received.

Reasonable estimates of costs or percentage of completion are possible.

The percentage of completion and the amount to accrue.

2.

To determine

Introduction: Generally Accepted Accounting Principles state that revenue must be recognized in the period in which it is earned. Hence for long-term projects, the use of the percentage completion method is mandatory. However, this rule does not apply to projects that will be completed within 2 years and to contractors with gross receipts not exceeding $25 million in the preceding 3 years. In addition, the project must fulfill the following conditions:

Payment for the work will be received.

Reasonable estimates of costs or percentage of completion are possible.

The action that should be taken in 2025.

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