After construction is completed, the legal ownership of the apartment is transferred to the client and they pay the remaining amount of CU40,000 each. The assumed construction period is 2 years from the contract date. AD Construction has the right to withhold payment from any client in the event that that client fails to pay for the contract prior to its completion. There is no Other special provisions in the contract with client A. Based on the above case, how is the revenue recognition of the contract between AD Construction and client B, whether one time or all of the time, please explain?
AD Construction, a property developer, is building a property complex consisting of 50 apartments. Apartments are similar in size and proportion - however, can be adapted to suit client needs. AD Construction enters into a contract with customer A. The client wants to buy an apartment and agrees to a total price of CU100,000 per apartment. The payment schedule is as follows:
- After signing the contract, clients pay a deposit of CU 10,000 each.
- Milestone: 1 year before the planned completion, AD Construction will send a progress report to the client and the client will have to pay CU 50,000 each.
- Completion: After construction is completed, the legal ownership of the apartment is transferred to the client and they pay the remaining amount of CU40,000 each. The assumed construction period is 2 years from the contract date. AD Construction has the right to withhold payment from any client in the event that that client fails to pay for the contract prior to its completion. There is no Other special provisions in the contract with client A. Based on the above case, how is the revenue recognition of the contract between AD Construction and client B, whether one time or all of the time, please explain?
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