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, then this method can be used. Revenue recognized point of long term contract A long-term contract qualifies for revenue recognition over time. The seller can recognize the revenue as per percentage of the completion of the project, which is recognized by revenue minus cost of completion until date. If a contract does not meet the performance obligation norm, then the seller cannot recognize the revenue till the project is complete. To determine: The recognized revenue, cost and, gross profit under cost recovery method in first and second year (IFRS).

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Answer 1

Question

Chapter 5, Problem 5.38BE

To determine

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, then this method can be used.

Revenue recognized point of long term contract

A long-term contract qualifies for revenue recognition over time. The seller can recognize the revenue as per percentage of the completion of the project, which is recognized by revenue minus cost of completion until date.

If a contract does not meet the performance obligation norm, then the seller cannot recognize the revenue till the project is complete.

To determine: The recognized revenue, cost and, gross profit under cost recovery method in first and second year (IFRS).

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Answer 2

Question

Chapter 5, Problem 5.38BE

To determine

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, then this method can be used.

Revenue recognized point of long term contract

A long-term contract qualifies for revenue recognition over time. The seller can recognize the revenue as per percentage of the completion of the project, which is recognized by revenue minus cost of completion until date.

If a contract does not meet the performance obligation norm, then the seller cannot recognize the revenue till the project is complete.

To determine: The recognized revenue, cost and, gross profit under cost recovery method in first and second year (IFRS).

Expert Solution & Answer

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Answer 3

Question

Chapter 5, Problem 5.38BE

To determine

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, then this method can be used.

Revenue recognized point of long term contract

A long-term contract qualifies for revenue recognition over time. The seller can recognize the revenue as per percentage of the completion of the project, which is recognized by revenue minus cost of completion until date.

If a contract does not meet the performance obligation norm, then the seller cannot recognize the revenue till the project is complete.

To determine: The recognized revenue, cost and, gross profit under cost recovery method in first and second year (IFRS).

Expert Solution & Answer

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Answer 4

Question

Chapter 5, Problem 5.38BE

To determine

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, then this method can be used.

Revenue recognized point of long term contract

A long-term contract qualifies for revenue recognition over time. The seller can recognize the revenue as per percentage of the completion of the project, which is recognized by revenue minus cost of completion until date.

If a contract does not meet the performance obligation norm, then the seller cannot recognize the revenue till the project is complete.

To determine: The recognized revenue, cost and, gross profit under cost recovery method in first and second year (IFRS).

Expert Solution & Answer

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Answer 5

Chapter 5, Problem 5.38BE

To determine

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, then this method can be used.

Revenue recognized point of long term contract

A long-term contract qualifies for revenue recognition over time. The seller can recognize the revenue as per percentage of the completion of the project, which is recognized by revenue minus cost of completion until date.

If a contract does not meet the performance obligation norm, then the seller cannot recognize the revenue till the project is complete.

To determine: The recognized revenue, cost and, gross profit under cost recovery method in first and second year (IFRS).

Answer 6

Chapter 5, Problem 5.38BE

To determine

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, then this method can be used.

Revenue recognized point of long term contract

A long-term contract qualifies for revenue recognition over time. The seller can recognize the revenue as per percentage of the completion of the project, which is recognized by revenue minus cost of completion until date.

If a contract does not meet the performance obligation norm, then the seller cannot recognize the revenue till the project is complete.

To determine: The recognized revenue, cost and, gross profit under cost recovery method in first and second year (IFRS).

Answer 7

Chapter 5, Problem 5.38BE

To determine

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, then this method can be used.

Revenue recognized point of long term contract

A long-term contract qualifies for revenue recognition over time. The seller can recognize the revenue as per percentage of the completion of the project, which is recognized by revenue minus cost of completion until date.

If a contract does not meet the performance obligation norm, then the seller cannot recognize the revenue till the project is complete.

To determine: The recognized revenue, cost and, gross profit under cost recovery method in first and second year (IFRS).

Answer 8

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Answer 9

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Answer 10

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Answer 11

Ch. 5 - What are the five key steps a company follows to...Ch. 5 - What indicators suggest that a performance...Ch. 5 - What criteria determine whether a company can...Ch. 5 - We recognize service revenue either at one point...Ch. 5 - What characteristics make a good or service a...Ch. 5 - Prob. 5.6Q Ch. 5 - What must a contract include for the contract to...Ch. 5 - How might the definition of probable affect...Ch. 5 - When a contract includes an option to buy...Ch. 5 - Prob. 5.10Q

Solution Summary: The author explains the cost recovery method, where gross profit is recognized when the costs of the sales are recovered. Revenue recognized point of long-term contract A contract does not meet the performance obligation norm.

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