Can some one give some idea on how to answer this question? Please thoroughly with detail. Please respond in your own words with no paraphrasing, quotes or journal entries and answer each question separately with complete sentences. Required: Answer separately in your first response for each of the cases, 1. determine when the seller should recognize revenue and expense. 2. Explain your answer using GAAP revenue recognition guidelines. 3. Explain how each transaction would appear on the income statement, balance sheet and cashflow statement. Case 1: Your construction company entered into a four-year contract to build a store for a fixed price of $6,500,000. The estimated costs are 6,000,000 at the time the contract is signed. It is now the end of the 2nd year, and you estimate that you are 50% complete and your estimate to complete will total 7,000,000 because of labor problems. What are the two alternative methods and based on the method: 1. When do you recognize the revenue 2. What if you estimate a total loss on the project. 3. What if you believe that the estimated costs can be reduced, and you will make an overall profit on the project.
Can some one give some idea on how to answer this question? Please thoroughly with detail. Please respond in your own words with no paraphrasing, quotes or journal entries and answer each question separately with complete sentences. Required: Answer separately in your first response for each of the cases, 1. determine when the seller should recognize revenue and expense. 2. Explain your answer using GAAP revenue recognition guidelines. 3. Explain how each transaction would appear on the income statement, balance sheet and cashflow statement. Case 1: Your construction company entered into a four-year contract to build a store for a fixed price of $6,500,000. The estimated costs are 6,000,000 at the time the contract is signed. It is now the end of the 2nd year, and you estimate that you are 50% complete and your estimate to complete will total 7,000,000 because of labor problems. What are the two alternative methods and based on the method: 1. When do you recognize the revenue 2. What if you estimate a total loss on the project. 3. What if you believe that the estimated costs can be reduced, and you will make an overall profit on the project.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please answer should be in step by step format and it will be not in image format
Transcribed Image Text:Can some one give some idea on how to answer this question? Please thoroughly
with detail.
Please respond in your own words with no paraphrasing, quotes or journal entries and answer each
question separately with complete sentences.
Required: Answer separately in your first response for each of the cases,
1. determine when the seller should recognize revenue and expense.
2. Explain your answer using GAAP revenue recognition guidelines.
3. Explain how each transaction would appear on the income statement, balance sheet and cashflow
statement.
Case 1: Your construction company entered into a four-year contract to build a store for a fixed price of
$6,500,000. The estimated costs are 6,000,000 at the time the contract is signed. It is now the end of
the 2nd year, and you estimate that you are 50% complete and your estimate to complete will total
7,000,000 because of labor problems. What are the two alternative methods and based on the
method:
1. When do you recognize the revenue
2. What if you estimate a total loss on the project.
3. What if you believe that the estimated costs can be reduced, and you will make an overall profit on
the project.
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