BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

Solutions

Chapter
Section
BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
1 views

Village Company is accounting for a long-term construction contract where revenue is recognized over time. The project is built to the customer’s specifications, and the customer can make changes as construction is ongoing. It is a 3-year, fixed-fee contract that is presently in its first year. The latest reasonable estimates of total contract costs indicate that the contract will be completed at a profit. Village will submit progress billings to the customer and has reasonable assurance that collections on these billings will be received in each year of the contract. The contract can be cancelled at any time by the customer who will retain control of any work done to date.

Required:

  1. 1. When should revenue from contracts be accounted for over time versus at a point in time?
  2. 2. What facts in the preceding situation indicate that Village should account for this long-term construction contract over time?
  3. 3. How would the income recognized in each year of this long-term construction contract be determined using the cost-to-cost method of determining progress toward satisfaction of the performance obligation?
  4. 4. What is the effect on income, if any, of the progress billings and the collections on these billings?

1.

To determine

State the time period at which the revenue from contract be accounted for over time versus at a point in time.

Explanation

Any of the following three conditions must be met, for a “performance obligation” to be fulfilled over time versus a point in time:

  • “The performance of the seller builds or improves as asset (for instance, work in progress) that the customer controls the asset as it is built or improved”...

2.

To determine

State the facts in the preceding situation that indicate that village must account for this long-term construction contract over time.

3.

To determine

State the manner in which the income recognized in each year of this long-term construction contract is ascertained using the cost-to-cost method of ascertaining progress toward satisfaction of the performance obligation.

4.

To determine

State the effect on income with respect to progress billings and collections on these billings.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What does human capital include?

Accounting Information Systems

What five types of transactions involving notes payable do businesses generally encounter?

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

WACC The following table gives Foust Company's earnings per share for the last 10 years. The common stock, 7.8 ...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)