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Long term contract losses long term construction

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Long-Term Contract LossesLONG-TERM CONSTRUCTION CONTRACTSLO 7 Identify the proper accounting for losses on long-term contracts.APPENDIX18A
18-41b)Prepare the journal entries to record revenue and expense for 2017, 2018,and 2019 assuming the estimated cost to complete at the end of 2018 was$215,436 instead of $170,100.Casper Construction Co.Illustration:Loss on Profitable ContractLONG-TERM CONTRACT LOSSESLO 7APPENDIX18A
18-42Illustration:Loss on Profitable ContractLONG-TERM CONTRACT LOSSESLO 7APPENDIX18A
18-43Illustration:Loss on Profitable ContractLONG-TERM CONTRACT LOSSESLO 7APPENDIX18A
18-44c)Prepare the journal entries for 2017, 2018, and 2019 assuming theestimated cost to complete at the end of 2018 was$246,038instead of$170,100.Illustration:Loss on Unprofitable ContractLONG-TERM CONTRACT LOSSESLO 7APPENDIX18A201720182019
18-45Illustration:Loss on Unprofitable Contract$675,000 – 683,438 =(8,438) cumulative lossLONG-TERM CONTRACT LOSSESLO 7APPENDIX18A201720182019
18-46Illustration:Loss on Unprofitable ContractLONG-TERM CONTRACT LOSSESLO 7APPENDIX18A
18-47For theCompleted-Contractmethod, companies wouldrecognize the following loss :Illustration:Loss on Unprofitable ContractLONG-TERM CONTRACT LOSSESLO 7APPENDIX18A
18-48Twofees:Initial franchise fee (establishing the relationship and initialservices)Continuing franchise feesFor continuing rights granted by the agreementFor providing management training, advertising andpromotion, legal assistance, and other supportFranchise AccountingREVENUE RECOGNITION FOR FRANCHISESLO 13APPENDIX18B
18-491.Identify separate performance obligations, e.g. trainingservices & equipment (sold separately in similar situation)2.Recognized “unearned revenue” before performanceobligations are satisfied (e.g. franchise right, training,equipment).3.No recognition of royalty revenue until uncertainty is resolved..REVENUE RECOGNITION FOR FRANCHISESLO 13APPENDIX18BIdentify the performance obligations and the point in time when theperformance obligations are satisfied and revenue is recognized.
18-50Recognition of Franchise Rights RevenueOver TimeFranchisor provides access to the right rather thantransferring control of the franchise rights.“Unearned Franchise Revenue” & amortized over agreementperiod to “Franchise Revenue”.APPENDIX18BREVENUE RECOGNITION FOR FRANCHISESLO 13
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Term
Spring
Professor
mildred
Tags
Revenue, Revenue Recognition, Generally Accepted Accounting Principles, APPENDIX 18A

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