The revenue recognition principle The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) of the company is completed. Installment sales method: Under the installment sales, the revenue and costs are recognized only when the payment of cash is received from customer. Two composed components are involved in the each payment of cash. Components of sales are as follows: Partial recovery of the cost from sales Component of gross profit These components are determined by the percentage of gross profit which is applicable to sales. Cost recovery method: Under the cost recovery method, gross profit is recognized when the cost of the sales is recovered. Where there is an extremely high degree of uncertainty in the installment sales, this method can be used. The amount of cash collected on installment sales in the year 2018.
The revenue recognition principle The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) of the company is completed. Installment sales method: Under the installment sales, the revenue and costs are recognized only when the payment of cash is received from customer. Two composed components are involved in the each payment of cash. Components of sales are as follows: Partial recovery of the cost from sales Component of gross profit These components are determined by the percentage of gross profit which is applicable to sales. Cost recovery method: Under the cost recovery method, gross profit is recognized when the cost of the sales is recovered. Where there is an extremely high degree of uncertainty in the installment sales, this method can be used. The amount of cash collected on installment sales in the year 2018.
Solution Summary: The author explains the revenue recognition principle and the cost recovery method.
The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) of the company is completed.
Installment sales method:
Under the installment sales, the revenue and costs are recognized only when the payment of cash is received from customer. Two composed components are involved in the each payment of cash. Components of sales are as follows:
Partial recovery of the cost from sales
Component of gross profit
These components are determined by the percentage of gross profit which is applicable to sales.
Cost recovery method:
Under the cost recovery method, gross profit is recognized when the cost of the sales is recovered. Where there is an extremely high degree of uncertainty in the installment sales, this method can be used.
The amount of cash collected on installment sales in the year 2018.
Requirement – 2
To determine
The amount of gross profit would be recognized in the installment sales method.
A computer consulting company uses job costing system and has a pre-determined overhead rate of $24 per direct labor hour. This amount is based on an estimated overhead of $23,000 and 2,000 estimated Direct Labor hours. In addition, Selling, General, and Administrative (SG&A) costs for the period totaled $155,000. Total units produced during the period were 1,250,000. Job # 175 incurred direct material costs of $60 and three direct labor hours costing of $83 per hour. What is the total cost of Job # 175?
General accounting
A computer consulting company uses job costing system and has a pre-determined overhead rate of $24 per direct labor hour. This amount is based on an estimated overhead of $23,000 and 2,000 estimated Direct Labor hours. In addition, Selling, General, and Administrative (SG&A) costs for the period totaled $155,000. Total units produced during the period were 1,250,000. Job # 175 incurred direct material costs of $60 and three direct labor hours costing of $83 per hour. What is the total cost of Job # 175? Don't Use Ai