In long-term construction contracts, which method recognizes revenue progressively and which only at project completion?

• A. Percent-of-completion recognizes revenue and gross profit as work progresses; completed contract recognizes revenue only when finished.
• B. Percent-of-completion recognizes revenue only at completion; completed contract recognizes revenue as work progresses.
• C. In long-term projects, revenue is recognized only when completed under both methods.
• D. Percent-of-completion defers all revenue; completed contract recognizes revenue monthly.

Answer: (B)

The key idea is how revenue from long‑term construction contracts is recognized under two methods. With the percent‑of‑completion approach, revenue and gross profit are recognized as the work progresses, using a measure of progress (such as costs incurred to date relative to total estimated costs). This ties revenue to the ongoing performance and costs already incurred. With the completed‑contract method, revenue and gross profit are deferred and recognized only when the project is finished, with all costs accumulated beforehand.

So the correct description is that percent‑of‑completion recognizes revenue and gross profit as work progresses, while completed‑contract recognizes revenue only at project completion. The other statements mix up the timing—percent‑of‑completion at completion, or revenue being recognized under both methods before completion, or revenue being recognized monthly under percent‑of‑completion—are inconsistent with how these methods actually operate.