Everyone, let’s work on question 28 of the 2015 First-Class Constructor Examination – multiple-choice questions 27-30 from the \"Engineering Economics\" section; there will be a reward for those who answer correctly

Thread Content

27. The method for recognizing contract revenue and allocating costs and expenses adopted in Accounting Standard for Business Enterprises No. 15 – Construction Contracts is as follows. A. Percentage-of-completion method B. Completion-based settlement method C. Phased settlement method D. Monthly settlement method 【Answer】A 【Expert explanation】This question examines the procedures for accounting for project costs. In accordance with the Accounting Standards for Business Enterprises – Construction Contracts, the percentage-of-completion method is used to recognize revenue from construction projects and to allocate costs and expenses; BCD is a method for settling project payments. See page P107 of the textbook. 29. According to the current Accounting Standards for Business Enterprises, which statement regarding the accounting basis is correct? A. The income that an enterprise has already earned is recorded in the profit statement for the period in which the funds are actually received. B. The expenses that an enterprise must bear are recorded in the profit statement for the period in which the funds are actually spent. C. An enterprise should conduct accounting calculations on the basis of the cash basis and the assumption of ongoing operations. D. An enterprise should carry out accounting recognition, measurement, and reporting on the basis of the accrual basis. 【Answer】D 【Expert Explanation】The recording in the profit statement must be done according to the accrual basis; options A and B relate to the cash basis, and option C also mentions the cash basis, so they can be excluded. Thus, only option D is correct ； See page P90 of the textbook ； 30. The construction entity borrows money from a bank to finance the investment in a particular project; the loan term is 5 years, with a project construction period of 2 years. Once the project is completed, it begins operations. According to the terms of the loan, the principal and interest must be repaid in equal amounts at the end of each year within the 5-year loan period. Therefore, the interest on the construction loan that the entity pays during the 3rd to 5th years should be included in the expenses of those respective years. A. Operating costs B. Administrative expenses C. Interest during the construction period D. Financial expenses 【Answer】D 【Expert explanation】The interest generated on loans during the construction period but in periods when no construction is taking place cannot be capitalized; it is not included in the interest costs related to the construction period. Therefore, it does not constitute part of the investment cost and is instead accounted for as part of the total costs. Refer to paragraph 3 from the bottom on page 49 of the textbook. Depreciation, amortization, and interest are not included in operating costs; therefore, A and C are excluded ； Interest expense is unrelated to management, so it is not an administrative expense; rather, it falls under financial expenses. See paragraph 4 on page P52 of the textbook.