Percentage of Completion Method
Company is accounting for a long-term construction contract using the
percentage-of-completion method. It is a 4-year contract that is
currently in its second year. The latest estimates of total contract
costs indicate that the contract will be completed at a profit to
Answer the following questions in the Discussion Board:
- What theoretical justification is there for Widjaja Company’s use of the percentage-of-completion method?
- How would progress
billings be accounted for? Include in your discussion the
classification of progress billings in Widjaja Company financial
- How would the
income recognized in the second year of the 4-year contract be
determined using the cost-to-cost method of determining percentage of
- What would be the
effect on earnings per share in the second year of the 4-year contract
of using the percentage-of-completion method instead of the
completed-contract method? Discuss.
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2016). Financial accounting and accounting standards. Intermediate accounting (16th ed.). (p. 1048–1049). New York, NY: John Wiley & Sons, Inc.