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In accounting for long-term construction contracts (those taking longer than one year to complete), the two methods commonly followed are the percentage-of-completion and completed-contract methods.
Instructions
(a) Discuss how earnings on long-term construction contracts are recognized and computed under these two methods.
(b) Under what circumstances should one method be used over the other?
(c) How are job costs and interim billings reflected on the balance sheet under the percentage-of-completion method and the completed-contract method?
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