Exam 6: Revenue Recognition

When there is a continuous earnings process, but the progress toward completion is not measurable, ASPE requires the use of the

The transaction price recorded by a company should be based on

Percentage-of-completion method Flames Corp. contracted to build a bridge for $ 5,000,000. Construction began in 2020 and was completed in 2021. Data relating to the construction are: $\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\underline{2020}\quad\quad\underline{2021}$ $\text {Costs incurred}\ldots \ldots \ldots \ldots \ldots \ldots \ldots\quad\quad\quad\quad\$1,620,000\quad\$1,400,000$ $\text {Estimated cast to complete} \ldots \ldots \ldots \ldots \ldots \ldots1,380,000\quad\quad -$ Instructions Using the percentage-of-completion method and the cost-to-cost basis, a) How much revenue should be reported for 2020? Show your calculation. b) Prepare the journal entry to record progress billings of $ 1,700,000 during 2020. c) Prepare the journal entry to record the revenue and gross profit for 2020. d) How much gross profit should be reported for 2021? Show your calculation.

Losses on unprofitable long-term construction projects

To determine if a performance obligation exists,

Which of the following statements regarding the completed contract method is NOT true?

Economics of a transaction The following are independent situations that require professional judgement for determining when to recognize revenue from the transactions. 1. Volkswagen sells all its vehicles with the promise that any service required in the first year of ownership will be free of charge. 2. Walmart sells you a new wardrobe online. The wardrobe is shipped and arrives in November, and you charge it to your Walmart credit card. In December, you receive your Walmart credit card statement and pay the amount due. 3. Norwegian Cruise lines sells you a 10-day Mediterranean cruise. The cost includes your transportation (of course), room and board, and meals and entertainment on the ship. Shore excursions are an additional cost. 4. You go back to Walmart and buy some hangers and socks to go in your new wardrobe. You pay with cash. 5. Students pre-register for online classes at Royal Roads University year round, one month in advance of their course start-date. 6. In February, Splashes sells dishwashers with 3 year extended warranties. The dishwashers are delivered in April, and payment is due upon delivery. Warranty plans are normally sold separately. Instructions For each scenario, identify what is being "sold": goods, services, or a combination.

Under a consignment sales arrangement,

Under the percentage-of-completion method, how should earned but unbilled revenues on a long-term contract be disclosed on the statement of financial position?

Performance obligations Trikonasana Inc. enters into a contract to design and build a bridge connecting a busy downtown core to a shoreline across the way that is home to many commuters. Trikonasana is responsible for overall management of the project and identifies various goods and services to be provided, including engineering, site clearance, foundation, procurement, construction of the structure, and so on. Instructions Under IFRS, does Trikonasana have a single performance obligation to the city in this revenue arrangement?

Percentage-of-completion method Jets Ltd. contracted to build a high-rise for $ 6,000,000. Construction began in 2020 and is expected to be completed in 2020. Data for 2020 and 2021 are: $\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\underline{2020}\quad\quad\underline{2021}$ $\text {Costs incurred}\ldots \ldots \ldots \ldots \ldots \ldots\ldots \ldots \ldots \ldots \ldots \ldots \ldots\$900,000\quad\$1,700,000$ $\text {Estimated costs to complete}\ldots \ldots \ldots \ldots \ldots \ldots \ldots3,600,000\quad2,400,000$ Instructions Using the percentage-of-completion method and the cost-to-cost basis, a) How much gross profit should be reported for 2020? Show your calculation. b) How much gross profit should be reported for 2021? Show your calculation. c) Prepare the journal entry to record the revenue and gross profit for 2021.

A project was correctly accounted for under the percentage-of-completion method. At the end of the project, the Construction-in-Process account includes total debits and credits of $ 3,500,000. Assuming that total gross profit of $ 1,200,000 was recognized throughout the contract, total construction costs were

Which of the following is NOT an acceptable allocation approach to transaction pricing?

Under ASPE, when selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be

Use the following information to answers the following questions: During 2020, Bing Corp. started a construction job with a total contract price of $ 1,050,000. Bing has consistently used the completed contract method. The job was completed on December 15, 2021. Additional data are as follows: Actual costs incurred Estimated remaining costs Billings to date Collections to date \ 405,000 405,000 360,000 200,000 \ 457,500 - 690,000 480,000 -For 2020, what amount should Bing recognize as gross profit?

Which of the following statements does NOT describe a long-term construction project that is accounted for under the completed-contract method?

A credit that is realized through an entity's ordinary activities would be treated as