IIA-CIA-PART2 · Question #460
A manufacturer is under contract to produce and deliver a number of aircraft to a major airline. As part of the contract, the manufacturer is also providing training to the airline's pilots. At the…
The correct answer is B. All completed training costs, and the cost of actual production hours completed to date. The accounting treatment should reflect the actual costs incurred. Training costs are recognized as they are completed, regardless of the delivery status of the aircraft. For the aircraft production, the costs should be accounted for based on the actual production hours…
Question
A manufacturer is under contract to produce and deliver a number of aircraft to a major airline. As part of the contract, the manufacturer is also providing training to the airline's pilots. At the time of the audit, the delivery of the aircraft had fallen substantially behind schedule while the training had already been completed. If half of the aircraft under contract have been delivered, which of the following should the internal auditor expect to be accounted for in the general ledger?
Options
- ATraining costs allocated to the number of aircraft delivered, and the cost of actual production hours
- BAll completed training costs, and the cost of actual production hours completed to date.
- CTraining costs allocated to the number of aircraft delivered, and 50% of contracted production
- DAll completed training costs, and 50% of the contracted production costs.
How the community answered
(33 responses)- A24% (8)
- B58% (19)
- C12% (4)
- D6% (2)
Explanation
The accounting treatment should reflect the actual costs incurred. Training costs are recognized as they are completed, regardless of the delivery status of the aircraft. For the aircraft production, the costs should be accounted for based on the actual production hours completed to date. This ensures that the financial records accurately represent the work performed and the expenses
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