In the case of a small home construction company that builds under long-term contracts, generally:
a. The percentage of completion method is required to report the income from the construction contracts.
b. The percentage of completion method can be elected and generally will defer income until the contract is completed.
c. The completed contract method can be used and generally will defer income.
d. The accrual method must be used because inventories are an income-producing factor.
e. None of the above is true.
c
RATIONALE: The major tax advantage of the completed contract method is the ability to defer income. The small home construction company qualifies under an exception which permits the completed contract method to be used.
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