QUIZ

1. Costs that relate to future activity on the contract such as cost of material delivered to
the site and advance payment to sub-contractors should be considered in the
determination of construction cost. FALSE
2. The Construction in Process account includes total costs incurred plus cumulative
recognized profit or loss. TRUE
3. If the contracts outcome cannot be reliably estimated, no profit should be recognized.
TRUE
4. Under IAS 11, if previously recognized contract revenue becomes uncollectable, the
amount should be recognized as a deduction from revenue in the current period. FALSE
5. Incentive payments received or receivable may be included in the contract if specified
performance standards are met like an early completion of the contract. TRUE
6. The percentage-of-completion method of accounting for long-term construction contract
is an exception to the revenue recognition principle. TRUE
7. The rationale for adopting the percentage-of-completion method is it results in a lower
income tax. FALSE
8. Cost estimates on a long-term contract may indicate that a loss will result on completion
of the entire contract. In this case, the entire expected loss should be recognized in the
current period, regardless of the method to be used. TRUE
9. The construction period being reasonably estimated is not an element necessary in
order to use the percentage-of-completion method. TRUE
10. The calculation of the income recognized in a long-term construction contract accounted
for using the percentage-of-completion method includes the ratio of total costs incurred
to date to total estimated costs. TRUE