Consultant Inc. is a firm of consulting engineers, newly established to advise on a large project taking three years to complete. Their fee for this work is a percentage of the total project costs, payable on completion of the project. In the interim, advances on the final fee are made at six-monthly intervals. The total project costs will not be known until the project is completed. The following advances were received by Consultant Inc. during the three-year period: Year ended 31 December 20x0 K25, 000 Year ended 31 December 20x1 K30, 000 Year ended 31 December 20x2 K30, 000When the total costs were computed during the year ended 31 December 20x0, it was found that a further sum of K50, 000 was due to Consultant Inc.REQUIRED;Explain how Consultant Inc. would show the payments made during the periods covered by the project. Justify your explanation in terms of the concepts of accounting which you consider apply to this situation.

Here given the details of the Consultancy Inc, consulting engineering company to taken care about…

Answered: Consultant Inc. is a firm of consulting…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 10C

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Consultant Inc. is a firm of consulting engineers, newly established to advise on a large project taking three years to complete. Their fee for this work is a percentage of the total project costs, payable on completion of the project. In the interim, advances on the final fee are made at six-monthly intervals. The total project costs will not be known until the project is completed. The following advances were received by Consultant Inc. during the three-year period:

Year ended 31 December 20x0 K25, 000

Year ended 31 December 20x1 K30, 000

Year ended 31 December 20x2 K30, 000

When the total costs were computed during the year ended 31 December 20x0, it was found that a further sum of K50, 000 was due to Consultant Inc.

REQUIRED;

Explain how Consultant Inc. would show the payments made during the periods covered by the project. Justify your explanation in terms of the concepts of accounting which you consider apply to this situation.

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