1 revenue recognition instructor adnan shoaib part ii: corporate accounting concepts and issues...
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Revenue Recognition
InstructorInstructorAdnan ShoaibAdnan Shoaib
PART II: Corporate Accounting Concepts and PART II: Corporate Accounting Concepts and IssuesIssues
Lecture 20Lecture 20
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1. Apply the revenue recognition principle.
2. Describe accounting issues for revenue recognition at point of
sale.
3. Apply the percentage-of-completion method for long-term
contracts.
4. Apply the completed-contract method for long-term contracts.
5. Identify the proper accounting for losses on long-term contracts.
6. Describe the installment-sales method of accounting.
7. Explain the cost-recovery method of accounting.
Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives
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Current Environment
Guidelines for
revenue
recognition
Departures from
sale basis
Revenue Recognition at the
Point of Sale
Revenue Recognition
before Delivery
Revenue Recognition after
Delivery
Sales with discounts
Sales with right of return
Sales with buybacks
Bill and hold sales
Principal-agent relationships
Trade loading and channel stuffing
Multiple-deliverable arrangements
Installment-sales
method
Cost-recovery
method
Deposit method
Summary of
bases
Percentage-of-
completion
method
Completed-
contract method
Long-term
contract losses
Disclosures
Completion-of-
production basis
Revenue RecognitionRevenue RecognitionRevenue RecognitionRevenue Recognition
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Realization PrincipleRealization PrincipleRealization PrincipleRealization Principle
Record revenue when:
Revenues are inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both)
from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central
operations.
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Realization PrincipleRealization PrincipleRealization PrincipleRealization Principle
Revenue recognition is often tied to delivery of the product from the seller to the buyer.
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The Current EnvironmentThe Current EnvironmentThe Current EnvironmentThe Current Environment
Restatements for improper revenue recognition are
relatively common and can lead to significant share price
adjustments.
Revenue recognition is a top fraud risk and regardless
of the accounting rules followed (IFRS or U.S. GAAP),
the risk or errors and inaccuracies in revenue reporting is
significant.
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The revenue recognition principle provides that
companies should recognize revenue
Guidelines for Revenue Recognition
The Current EnvironmentThe Current EnvironmentThe Current EnvironmentThe Current Environment
LO 1 Apply the revenue recognition principle.
(1) when it is realized or realizable and
(2) when it is earned.
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Sale of product from inventory
Type of Transaction
Rendering a service
Permitting use of an asset
Sale of asset other than inventory
Date of sale (date of delivery)
Services performed and
billable
As time passes or assets are
used
Date of sale or trade-in
Gain or loss on disposition
Revenue from interest, rents, and royalties
Revenue from fees or
services
Revenue from sales
Description of Revenue
Timing of Revenue
Recognition
The Current EnvironmentThe Current EnvironmentThe Current EnvironmentThe Current Environment
LO 1 Apply the revenue recognition principle.
Revenue Recognition Classified by Type of Transaction
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Earlier recognition is appropriate if there is a high degree of
certainty about the amount of revenue earned.
Delayed recognition is appropriate if the
► degree of uncertainty concerning the amount of
revenue or costs is sufficiently high or
► sale does not represent substantial completion of the
earnings process.
Departures from the Sale Basis
The Current EnvironmentThe Current EnvironmentThe Current EnvironmentThe Current Environment
LO 1 Apply the revenue recognition principle.
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The Current EnvironmentThe Current EnvironmentThe Current EnvironmentThe Current Environment
LO 1 Apply the revenue recognition principle.
Illustration 18-2
Revenue Recognition Alternatives
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Revenue Recognition at DeliveryRevenue Recognition at DeliveryRevenue Recognition at DeliveryRevenue Recognition at Delivery
When the product or service has been delivered to the
customer and cash has been received or a receivable has
been generated that has reasonable assurance of
collectibility.
When the product or service has been delivered to the
customer and cash has been received or a receivable has
been generated that has reasonable assurance of
collectibility.
Recognize Revenue
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FASB’s Concepts Statement No. 5, companies usually
meet the two conditions for recognizing revenue by the time
they deliver products or render services to customers.
LO 2 Describe accounting issues for revenue recognition at point of sale.
Implementation problems,
Sales with Discounts
Sales When Right of
Return
Sales with Buybacks
Bill and Hold Sales
Principal-Agent Relationships
Trade Loading and Channel
Stuffing
Multiple-Deliverable
Arrangements
Revenue Recognition at Point of Sale (Delivery)Revenue Recognition at Point of Sale (Delivery)Revenue Recognition at Point of Sale (Delivery)Revenue Recognition at Point of Sale (Delivery)
13 LO 2 Describe accounting issues for revenue recognition at point of sale.
Trade discounts or volume rebates should reduce
consideration received or receivable and the related
revenue.
If payment is delayed, seller should impute an interest
rate for the difference between the cash or cash
equivalent price and the deferred amount.
Sales with Discounts
Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
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Facts: Sansung Company has an arrangement with its customers that
it will provide a 3% volume discount to its customers if they purchase
at least $2 million of its product during the calendar year. On March
31, 2012, Sansung has made sales of $700,000 to Artic Co. In the
previous two years, Sansung sold over $3,000,000 to Artic in the
period April 1 to December 31. Sansung makes the following entry on
March 31, 2012.
LO 2 Describe accounting issues for revenue recognition at point of sale.
Accounts receivable 679,000
Sales revenue 679,000
Illustration 18-3
Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
VOLUME DISCOUNTVOLUME DISCOUNT Illustration 18-3
15 LO 2 Describe accounting issues for revenue recognition at point of sale.
Cash 679,000
Accounts receivable 679,000
Illustration 18-3
Facts: Sansung Company has an arrangement with its customers that
it will provide a 3% volume discount to its customers if they purchase
at least $2 million of its product during the calendar year. On March
31, 2012, Sansung has made sales of $700,000 to Artic Co. In the
previous two years, Sansung sold over $3,000,000 to Artic in the
period April 1 to December 31. Assuming Sansung’s customers meet
the discount threshold, Sansung makes the following entry.
Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
VOLUME DISCOUNTVOLUME DISCOUNT Illustration 18-3
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VOLUME DISCOUNTVOLUME DISCOUNT
LO 2
Cash 700,000
Accounts receivable 679,000
Sales discounts forfeited 21,000
Illustration 18-3
Facts: Sansung Company has an arrangement with its customers that
it will provide a 3% volume discount to its customers if they purchase
at least $2 million of its product during the calendar year. On March
31, 2012, Sansung has made sales of $700,000 to Artic Co. In the
previous two years, Sansung sold over $3,000,000 to Artic in the
period April 1 to December 31. Sansung makes the following entry on
March 31, 2012. If Sansung’s customers fail to meet the discount
threshold, Sansung makes the following entry upon payment.
Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
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Sales with Right of Return
Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
LO 2 Describe accounting issues for revenue recognition at point of sale.
Three possible revenue recognition methods are available when
the right of return exposes the seller to continued risks of
ownership:
1. not recording a sale until all return privileges have expired
or
2. recording the sale, but reducing sales by an estimate of
future returns.
3. Recording the sale and accounting for the returns as they
occur.
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Recognize revenue only if six conditions have been met.
LO 2 Describe accounting issues for revenue recognition at point of sale.
1. The seller’s price to the buyer is substantially fixed or
determinable at the date of sale.
2. The buyer has paid the seller, or the buyer is obligated to pay
the seller, and the obligation is not contingent on resale of the
product.
3. The buyer’s obligation to the seller would not be changed in the
event of theft or physical destruction or damage of the product.
Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
Sales with Right of Return
19 LO 2 Describe accounting issues for revenue recognition at point of sale.
Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
Sales with Right of Return
Recognize revenue only if six conditions have been met.
4. The buyer acquiring the product for resale has economic
substance apart from that provided by the seller.
5. The seller does not have significant obligations for future
performance to directly bring about resale of the product by the
buyer.
6. The seller can reasonably estimate the amount of future
returns.
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Question: When should Pesido recognize the revenue for the sale of the Question: When should Pesido recognize the revenue for the sale of the new laser equipment?new laser equipment?
Facts: Pesido Company is in the beta-testing stage for new laser
equipment that will help patients who have acid reflux problems. The
product that Pesido is selling has been very successful in trials to date. As
a result, Pesido has received regulatory authority to sell this equipment to
various hospitals. Because of the uncertainty surrounding this product,
Pesido has granted to the participating hospitals the right to return the
device and receive full reimbursement for a period of 9 months.
Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
LO 2
Illustration 18-5SALES WITH RETURNSSALES WITH RETURNS Illustration 18-5
Solution: Given that the hospital has the right to rescind the purchase for
a reason specified in the sales contract and Pesido is uncertain about the
probability of return, Pesido should not record revenue at time of delivery.
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Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
LO 2
Pesido sold $300,000 of laser equipment on August 1, 2012, and
retains only an insignificant risk of ownership. On October 15,
2012, $10,000 in equipment was returned.
August 1, 2012
Accounts receivable 300,000
Sales 300,000
October 15, 20121
Sales returns and allowances 10,000
Accounts receivable
10,000
SALES WITH RETURNSSALES WITH RETURNS
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Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
At December 31, 2012, based on prior experience, Pesido
estimates that returns on the remaining balance will be 4 percent.
Pesido makes the following entry to record the expected returns.
December 31, 2012
Sales returns and allowances 11,600
Allowance for sales returns and allowances
11,600
[($300,000 - $10,000) x 4% = 11,600]
LO 2 Describe accounting issues for revenue recognition at point of sale.
SALES WITH RETURNSSALES WITH RETURNS
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If a company sells a product in one period and agrees to
buy it back in the next period, has the company sold the
product?
The economic substance of this transaction is that the
seller retains the risks of ownership.
Sales with Buybacks
LO 2 Describe accounting issues for revenue recognition at point of sale.
Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
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Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
Facts: Morgan Inc., an equipment dealer, sells equipment to Lane
Company for $135,000. The equipment has a cost of $115,000.
Morgan agrees to repurchase the equipment at the end of 2 years
at its fair value. Lane Company pays full price at the sales date,
and there are no restrictions on the use of the equipment over the
2 years. Morgan records the sale as follows:
Cash 135,000
Sales Revenue
135,000
Cost of Goods Sold 115,000
Inventory
115,000LO 2
SALES WITH BUYBACKSALES WITH BUYBACK
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Bill and Hold Sales
Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
Buyer is not yet ready to take delivery but does take title.
Illustration 18-4
BILL AND HOLDBILL AND HOLD Illustration 18-7
Facts: Butler Company sells $450,000 of fireplaces to a local coffee
shop, Baristo, which is planning to expand its locations around the
city. Under the agreement, Baristo asks Butler to retain these
fireplaces in its warehouses until the new coffee shops that will
house the fireplaces are ready. Title passes to Baristo at the time the
agreement is signed.
Question: Should Butler report the revenue from this bill and hold Question: Should Butler report the revenue from this bill and hold arrangement when the agreement is signed, or should revenue be arrangement when the agreement is signed, or should revenue be deferred and reported when the fireplaces are delivered?deferred and reported when the fireplaces are delivered?
LO 2
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Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
Solution: Butler should record the revenue at the time title
passes, provided
1. the risks of ownership have passed to Baristo, that is,
Butler does not have specific performance obligations
other than storage;
2. Baristo makes a fixed commitment to purchase the goods,
requests that the transaction be on a bill and hold basis,
and sets a fixed delivery date; and
3. goods must be segregated, complete, and ready for
shipment.
LO 2 Describe accounting issues for revenue recognition at point of sale.
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Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
LO 2 Describe accounting issues for revenue recognition at point of sale.
Accounts receivable 450,000
Sales 450,000
Illustration 18-4BILL AND HOLDBILL AND HOLD Illustration 18-7
Facts: Butler Company sells $450,000 of fireplaces to a local coffee
shop, Baristo, which is planning to expand its locations around the
city. Under the agreement, Baristo asks Butler to retain these
fireplaces in its warehouses until the new coffee shops that will
house the fireplaces are ready. Title passes to Baristo at the time the
agreement is signed. Butler makes the following entry.
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Principal-Agent Relationships
Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
LO 2 Describe accounting issues for revenue recognition at point of sale.
Amounts collected on behalf of the principal are not
revenue of the agent.
Revenue for the agent is the amount of the commission
it receives.
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Consignments
Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
LO 2 Describe accounting issues for revenue recognition at point of sale.
Manufacturers (or wholesalers) deliver goods but retain
title to the goods until they are sold.
Consignor (manufacturer or wholesaler) ships
merchandise to the consignee (dealer), who is to act as
an agent for the consignor in selling the merchandise.
Consignor makes a profit on the sale.
Consignee makes a commission on the sale.
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“Trade loading is a crazy, uneconomic, insidious practice
through which manufacturers—trying to show sales, profits,
and market share they don’t actually have—induce their
wholesale customers, known as the trade, to buy more
product than they can promptly resell.”
Trade Loading and Channel Stuffing
LO 2 Describe accounting issues for revenue recognition at point of sale.
Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
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A similar practice is referred to as channel stuffing. When
a software maker needed to make its financial results look
good, it offered deep discounts to its distributors to overbuy,
and then recorded revenue when the software left the
loading.
Trade Loading and Channel Stuffing
LO 2 Describe accounting issues for revenue recognition at point of sale.
Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
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MDAs provide multiple products or services to customers as
part of a single arrangement.
The major accounting issues related to this type of
arrangement are how to allocate the revenue to the various
products and services and how to allocate the revenue to
the proper period.
Multiple-Deliverable Arrangements
LO 2 Describe accounting issues for revenue recognition at point of sale.
Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
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All units in a multiple-deliverable arrangement are
considered separate units of accounting, provided that:
1. A delivered item has value to the customer on a
standalone basis; and
2. The arrangement includes a general right of return
relative to the delivered item; and
3. Delivery or performance of the undelivered item is
considered probable and substantially in the control of the
seller.
Multiple-Deliverable Arrangements
LO 2 Describe accounting issues for revenue recognition at point of sale.
Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
34
Multiple-Deliverable Evaluation Process
Multiple-Deliverable Arrangements
LO 2 Describe accounting issues for revenue recognition at point of sale.
Revenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of SaleRevenue Recognition at Point of Sale
Illustration 18-9
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Two Methods:
Percentage-of-Completion Method.
► Rationale is that the buyer and seller have
enforceable rights.
Completed-Contract Method.
Most notable example is long-term construction contract
accounting.
Revenue Recognition Before DeliveryRevenue Recognition Before DeliveryRevenue Recognition Before DeliveryRevenue Recognition Before Delivery
LO 2 Describe accounting issues for revenue recognition at point of sale.
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Must use Percentage-of-Completion method when estimates
of progress toward completion, revenues, and costs are
reasonably dependable and all of the following conditions
exist:
Revenue Recognition Before DeliveryRevenue Recognition Before DeliveryRevenue Recognition Before DeliveryRevenue Recognition Before Delivery
1. Contract clearly specifies the enforceable rights regarding
goods or services by the parties, the consideration to be
exchanged, and the manner and terms of settlement.
2. Buyer can be expected to satisfy all obligations.
3. Contractor can be expected to perform under the contract.
LO 2 Describe accounting issues for revenue recognition at point of sale.
37
Companies should use the Completed-Contract method when
one of the following conditions applies when:
Revenue Recognition Before DeliveryRevenue Recognition Before DeliveryRevenue Recognition Before DeliveryRevenue Recognition Before Delivery
1. Company has primarily short-term contracts, or
2. Company cannot meet the conditions for using the percentage-of-completion method, or
3. There are inherent hazards in the contract beyond the normal, recurring business risks.
LO 2 Describe accounting issues for revenue recognition at point of sale.
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Formula for Total Revenue to Be Recognized to Date
LO 3 Apply the percentage-of-completion method for long-term contracts.
Illustration 18-13
Percentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion Method
Illustration 18-14
Illustration 18-15
Percentage-of-Completion Method
39 LO 3 Apply the percentage-of-completion method for long-term contracts.
Percentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion Method
Illustration: Blue Diamond Construction Company has a
contract to construct a $4,500,000 bridge at an estimated cost
of $4,000,000. The contract is to start in July 2012, and the
bridge is to be completed in October 2014. The following data
pertain to the construction period.
40 LO 3 Apply the percentage-of-completion method for long-term contracts.
Percentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion Method
Illustration: Compute percentage complete.Illustration 18-16
41 LO 3 Apply the percentage-of-completion method for long-term contracts.
Percentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion Method
Illustration: Blue Diamond would make the following entries
to record (1) the costs of construction, (2) progress billings,
and (3) collections.Illustration 18-17
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Percentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion Method
Illustration: Percentage-of-Completion Revenue, Costs, and
Gross Profit by YearIllustration 18-18
LO 3 Apply the percentage-of-completion method for long-term contracts.
43 LO 3 Apply the percentage-of-completion method for long-term contracts.
Percentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion Method
Illustration: Blue Diamond’s entries to recognize revenue
and gross profit each year and to record completion and final
approval of the contract.Illustration 18-19
44 LO 3 Apply the percentage-of-completion method for long-term contracts.
Percentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion Method
Illustration: Content of Construction in Process Account—
Percentage-of-Completion MethodIllustration 18-20
45 LO 3 Apply the percentage-of-completion method for long-term contracts.
Percentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion Method
Financial Statement Presentation—Percentage-of-
Completion
Illustration 18-21
Computation of Unbilled Contract Price at 12/31/12
46 LO 3 Apply the percentage-of-completion method for long-term contracts.
Percentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion Method
Financial Statement—Percentage-of-Completion
Illustration 18-22
Blue Diamond Construction Company
2012
47 LO 3 Apply the percentage-of-completion method for long-term contracts.
Percentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion Method
Financial Statement—Percentage-of-Completion
Illustration 18-23
Blue Diamond Construction Company
2013
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2010 2011 2012 Contract price $675,000 $675,000 $675,000 Cost incurred current year 150,000 287,400 170,100 Estimated cost to complete in future years 450,000 170,100 0 Billings to customer current year 135,000 360,000 180,000 Cash receipts f rom customer Current year 112,500 262,500 300,000
2010 2011 2012 Contract price $675,000 $675,000 $675,000 Cost incurred current year 150,000 287,400 170,100 Estimated cost to complete in future years 450,000 170,100 0 Billings to customer current year 135,000 360,000 180,000 Cash receipts f rom customer Current year 112,500 262,500 300,000
A) Prepare the journal entries for 2010, 2011, and 2012. A) Prepare the journal entries for 2010, 2011, and 2012.
Casper Construction Co. Casper Construction Co.
LO 3 Apply the percentage-of-completion method for long-term contracts.
Percentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion Method
Illustration:
49 LO 3 Apply the percentage-of-completion method for long-term contracts.
Percentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion Method
2010 2011 2012
Costs incurred to date 150,000$ 437,400$ 607,500$
Estimated cost to complete 450,000 170,100
Est. total contract costs 600,000 607,500 607,500
Est. percentage complete 25.0% 72.0% 100.0%
Contract price 675,000 675,000 675,000
Revenue recognizable 168,750 486,000 675,000
Rev. recognized prior year (168,750) (486,000)
Rev. recognized currently 168,750 317,250 189,000
Costs incurred currently (150,000) (287,400) (170,100)
Gross profi t recognized 18,750$ 29,850$ 18,900$
Illustration:
50 LO 3 Apply the percentage-of-completion method for long-term contracts.
Percentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion Method
Illustration:Construction in progress 150,000 287,400 170,100
Cash 150,000 287,400 170,100
Accounts receivable 135,000 360,000 180,000 Billings on contract 135,000 360,000 180,000
Cash 112,500 262,500 300,000 Accounts receivable 112,500 262,500 300,000
Construction in progress 18,750 29,850 18,900 Construction expense 150,000 287,400 170,100
Construction revenue 168,750 317,250 189,000
Billings on contract 675,000 Construction in progress 675,000
20122010 2011
51 LO 3 Apply the percentage-of-completion method for long-term contracts.
Percentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion MethodPercentage-of-Completion Method
Illustration:
Income Statement 2010 2011 2012
Revenue on contracts 168,750$ 317,250$ 189,000$
Cost of construction 150,000 287,400 170,100 Gross profit 18,750 29,850 18,900
Balance Sheet (12/31)Current assets:
Accounts receivable 22,500 120,000 - Cost & profits > billings 33,750
Current liabilities:Billings > cost & profits 9,000