Accounting Methods: Accounting for Long Term Contracts

Question 1

In the completed-contract method

Answer 1

revenue is recognized when the contract is completed and it has been satisfactorily accepted

Question 2

Under a lookback rule

Answer 2

the taxpayer is required to recalculate the annual profit reported on a contract

it requires the taxpayer to substitute the actual costs and revenues for the estimated revenues and costs used in the percentage-of-completion method

Question 3

In the completed-contract method

Answer 3

revenue is recognized when the contract is completed and it has been satisfactorily accepted