Investments
Investments
11th Edition
ISBN: 9781259277177
Author: Zvi Bodie Professor, Alex Kane, Alan J. Marcus Professor
Publisher: McGraw-Hill Education
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Chapter 19, Problem 10PS
Summary Introduction

To choose an action by management of Hartfield Industries which will most likely result in low- Quality earnings.

Introduction:

Quality of earnings can be defined as the amount of earnings due to higher sales or less costs rather than artificial profits created by anomalies in the accounting statements or move used like inflation of stocks or change in depreciation.

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A company believes that it is subject to scrutiny by particular interest groups such as employee unions because it is earning expensive profits. Do you think that this might influence whether the company prefers to recognise revenue over time for its construction contracts, or whether it would prefer to defer profit recognition until the completion of the project? Using this case, discuss whether it be appropriate to recognise revenue at completion of production rather than at the point of sale?
Please solve this question in detail and please provide atleast 1 refrence Question : A company believes that it is subject to scrutiny by particular interest groups such as employee unions because it is earning excessive profits. Do you think that this might influence whether the company prefers to recognise revenue over time for its construction contracts, or whether it would prefer to defer profit recognition until the completion of the project? Using this case, discuss whether it be appropriate to recognise revenue at completion of production rather than at the point of sale? (word limit 500)
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