Week 7 - Suggested solutions to homework questions Week 7...

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Suggested solutions to homework questions – Week 7 Problem 12.5 1 Outback Gold • The company can sell its entire inventory of gold at any time at the prevailing market price. This means that the amount of revenue can be measured in dollar terms. Although the gold has not been provided to customers, sales are basically guaranteed. • Since mining and refining are the major costs of producing and selling gold, these costs have been incurred or are estimable at the end of the production process. • No collectability problems. Therefore, recognise revenue when the production process is complete. 2 Crazy Freddie Co. • Goods have been provided to customers when they take delivery. • Cost of the goods has been established by purchase by Freddie from the wholesaler. • Amount of revenue is estimable by the selling price of the goods. • Severe collectability problems because of customer defaults. Therefore, recognise revenue when cash is received. 3 Tom and Mark’s Construction • Revenue can be reasonably measured because contracts are for a fixed fee. • Not likely to be a collection problem because there has never been a problem in the
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Week 7 - Suggested solutions to homework questions Week 7...

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