Increase in the estimated total contract costs

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When there is a significant increase in the estimated total contract costs but the increase does not eliminate all profit on the contract, which of the following is correct?

a. Under both the percentage-of-completion and the completed-contract methods, the estimated cost increase requires a current period adjustment of excess gross profit recognized on the project in prior periods.

b. Under the percentage-of-completion method only, the estimated cost increase requires a current period adjustment of excess gross profit recognized on the project in prior periods.

c. Under the completed-contract method only, the estimated cost increase requires a current period adjustment of excess gross profit recognized on the project in prior periods.

d. No current period adjustment is required.

Reference no: EM13146631

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