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Unformatted text preview: 6-21.If there is a significant chance that payment on the contract will not be received, the realization test has not been met. Recognition of revenue should be delayed until there is a high probability of receiving the payment. This may mean recognizing all $11 million of revenue at completion of the contract, and recognizing all of the expenses on the contract at the same time.It is reasonable to ask whether the contract should be accepted in this instance. It is reasonable to suggest that the contract be altered to require progress payments as milestones are reached.2.Revenue should be recognized as it is earned:20X0 3/10 x $11 million=$3.3 million20X1 3/10 x $11 million=$3.3 million20X2 4/10 x $11 million=$4.4 million$11.06-8Except for the entry of July 12, these entries are straightforward.June 9 Accounts receivable30,000Sales30,000June 11Accounts receivable10,000Sales10,000June 18Cash29,400Cash discounts on sales600Accounts receivable30,000June 26Sales returns and allowances 1,000Accounts receivable...
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- Spring '08
- Generally Accepted Accounting Principles, bank rate, Discounts and allowances, John’s Fisheries