AccountingCh18to21 - Study notes for tests... were allowed...

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Chapter 18: Rev. Recognition Three factors to use when evaluating which rev. recognition method to use:    (a)  The economic substance of the event takes precedence over the legal form of the  transaction. Rev. is usually recognized at the time of the legal transaction. But may be  advanced or delayed if economic "reality" would otherwise be substantially distorted.  (b) sales-type lease, the lessor must recognize rev. even though no legal sale has occurred  (c)  The collectability of the receivable from the sale is reasonably assured. If  process is not complete so recognition is deferred. Rev. Recognition in the Period of the Sale rev.s are earned at the time of the sale. Accrual accounting is used, expenses are  realizable value. This method is used most often.  Rev. Recognition Prior to the Period of the Sale  is used to reflect economic  substance over legal form. The percentage-of-completion method of accounting for  LT service contracts are examples. Rev. Recognition at the Completion of Production  is used for certain precious  interchangeability. However, this alternative is rarely used.  Rev. Recognition After the Period of the Sale  is used when the collectability of  receivables is not reasonably assured or cannot be reliably estimated. The installment  Rev. Recognition Delayed Until a Future Event Occurs
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AccountingCh18to21 - Study notes for tests... were allowed...

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