Two accounting students were discussing the alternative methods of accounting for long-term construction contracts. The discussion focused on which method was most like the typical revenue recognition method of recognizing revenue at point of product delivery. Bill argued that the completed contract method was preferable because it was analogous to recognizing revenue at the point of delivery. John disagreed and supported the percentage-of-completion method, stating that it was analogous to accruing revenue during the earnings process, that is, as the work was performed.
Required:
Discuss the arguments made by both students. Which argument do you support? Why?