% of completion

Question 1

when appropiate

Answer 1

1) collection assured
2) estimate profit
3) measure of progress

Question 2

advantages

Answer 2

accurate reporting of stage of completion and periodic reporting of income

Question 3

disadvantage

Answer 3

estimates

Question 4

Journal entry for estimated gross profit earned

Answer 4

DR CIP

CR realized gross profit

Question 5

Steps

Answer 5

1) Gross profit—contract price
(est total cost)
=GP

2) % of completion–total cost to date/est total cost
3) gross profit earned to date —step 1 * step 2

Question 6

single period loss but overall contract profit

Answer 6

reduces profit from the previous year only