Problem: Cost estimates on a long-term contract may indicate that a loss will result on completion of the entire contract. In this case, the entire expected loss should be
1) recognized in the current period, regardless of whether the percentage-of-completion or completed-contract method is employed.
2) recognized in the current period under the percentage-of-completion method, but the completed-contract method should defer recognition of the loss to the time when the contract is completed.
3) recognized in the current period under the completed-contract method, but the percentage-of-completion method should defer the loss until the contract is completed.
4) deferred and recognized when the contract is completed, regardless of whether the percentage-of-completion or completed-contract method is employed.