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24 lo 7 some companies defer the recognition of

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_____ 24.(L.O. 7)Some companies defer the recognition of revenue because the collection of thesales price isnotreasonably assured.One method employed to defer revenue recognition isthe cost recovery method.Under the cost recovery method profit isnotrecognized until:A.the entire sales price is collected.B.the seller is convinced that collection is assured beyond a reasonable doubt.C.the buyer formally accepts delivery of the merchandise involved in the sale.D.cash payments by the buyer exceed the seller’s cost of the merchandise sold.
_____*25.(L.O. 8)Initial franchise fees, are recorded as revenue only when and as the franchisormakes substantial performance of the services it is obligated to perform and:
Chapter 18:Revenue Recognition18-19____________________________________________________________________________________REVIEW EXERCISES1.(L.O. 1, 2, 3, 4, 6 and *8) Match the revenue transaction listed on the left with the pointof revenue realization generally considered appropriate listed on the right.Revenue TransactionPoint of Realization____1.Cash sales of merchandiseA.When accounts receivable are collected____2.Sales of merchandise on accountB.When the designated agent collects the____3.Percentage-of-completion methodpurchase priceon long-term construction projectC.Date of delivery to customer____4.Completed-contract method onD.When the designated agent submits anlong-term construction project“account sales”____5.Installment salesE.As completion of the agreement by the____6.Consignment salesseller progresses2.(S. O. 3) Melanie Construction Company entered into a contract to construct a buildingfor Steve Elbert.The contract called for a flat fee of $900,000, and specified that a progress report begiven periodically as to percentage of completion. Construction activities for the first two years aresummarized below:2014:Construction costs incurred during the year amounted to $172,800; estimatedcost to complete, $547,200.2015:Construction costs incurred during the year amounted to $385,450; estimatedcost to complete, $166,750.Instructions:Using the percentage-of-completion method, compute the amount of gross profit MelanieConstruction Company should recognize in 2014 and 2015 as a result of this contract.______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
18-20Student Study Guide forIntermediate Accounting,15th Edition____________________________________________________________________________________3.(S. O. 3 and 4) Meyer Corporation uses the percentage-of-completion method to accountfor work performed under long-term construction contracts.Meyer began work under contract #7031-21,which provided for a contract price of $3,645,000.Additional data is as follows:20122013Costs incurred during the year...................................$563,000$1,764,000Estimated costs to complete, as of December 31.......1,500,000-0-Billings during the year.............................................580,0002,875,000Collections during the year........................................525,0002,670,000Instructions:a.What portion of the total contract price would be recognized as revenue in 2014and in 2015?

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Term
Spring
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Tags
Balance Sheet, Revenue, Generally Accepted Accounting Principles

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