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Intermediate Accounting: Reporting...

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

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Revenue for a company is recognized for accounting purposes when the customer obtains control over the good or service. In some situations, revenue is recognized at a point in time; in other cases, accountants would recognize revenue over time. (Ignore income taxes.)

Required:

  1. 1. Explain when it would be appropriate to recognize revenue over time as opposed to a point in time.
  2. 2. How would a seller determine if a customer has obtained control over a gen id or service?

1.

To determine

Explain the time that would be appropriate to recognize revenue over time as opposed to 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.
  • Simultaneously the customer receives and consumes the advantage of the performance of the seller as the seller performs...

2.

To determine

Explain the manner in which the seller will ascertain if a customer has obtained control over a good or service.

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