Explanation Revenue Recognition: Revenue recognition refers to the principle which tells about the conditions under which the revenue is recognized. It is one of the generally accepted accounting principles (GAAP). Generally, revenue is recognized when the commodity is supplied or given to the customer. Identification of the contract: Criteria to identify the contract Met Explanation All the parties will contract and agree to work under the contract Yes Both the parties signed the contract Each of the parties has right to check the goods and services which are transferred. Yes In the given provision it is clear regarding the right of the party. The mode of the payment of the goods and service should be identifiable. Yes All the schemes are clearly identifiable related to the payment and bonus. Table (1) Identification of the performance obligation: The performance obligation of the building and the Garage are control on building and garage. V can control the building before the completion and garage cannot be controlled before the completion. Transaction price: As the fixed price of the contract is $40million that is why it will be the transaction price of the contract between the V and C. There are some variable consideration which also the transaction price like a bonus. Table (2) The allocation of the transfer price for the building by C is $409,500 ( $ 300 , 000 + $ 109 , 500 ) The amount of the interest revenue: Table (3) Allocation of the transaction price to performance obligation: Table (4) Revenue recognition:

2nd Edition

ISBN: 9780134730370

Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

Publisher: PEARSON

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Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required…

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The five steps of the revenue recognition and necessary journal entry

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Chapter 8 Solutions

Intermediate Accounting (2nd Edition)

Ch. 8 - What are the primary issues involved in revenue...Ch. 8 - What is the fundamental principle underlying the...Ch. 8 - What is the fundamental principle underlying the...Ch. 8 - Prob. 8.4Q Ch. 8 - Prob. 8.5Q Ch. 8 - How is a performance obligation defined?Ch. 8 - What are the two criteria to define a good or...Ch. 8 - Prob. 8.8Q Ch. 8 - What principles regarding timing and measurement...Ch. 8 - Prob. 8.10Q

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The five steps of the revenue recognition and necessary journal entry

Solution Summary: The author explains the five steps of revenue recognition: identification of the contract, performance obligation, and transaction price.

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