Question

For each of the following independent situations, recommend how you would want to recognize revenue if you were the president of the company and you wanted to provide stakeholders information about how the company is performing. Support your answer. (To respond, you should identify alternative points for recognizing revenue and choose the one that best satisfies the objective of performance evaluation and can be reasonably supported.)
a. A construction company signs a contract to build a warehouse for a food distribution company. The project is to take 18 months from the date the contract is signed and the company will receive $10,000,000. At the company's fiscal year-end 60 percent of the project has been completed.
b. An investment company purchases shares of publicly traded companies for its port folio. During the year, the market value of the portfolio increases from $2,300,000 to $3,745,000. None of the shares were sold during the year.
c. A national bus company sells passes allowing passengers unlimited travel on the company's buses for 60 days from the day the pass is first used. Passes must be purchased at least 90 days before they are first used. Once purchased, the passes aren't refundable.
d. A law firm charges $10,000 per year to clients who wish to have legal advice available to them 24 hours a day, seven days a week. (The $10,000 fee is simply for the privilege of having a lawyer available all the time. These clients then have to pay the lawyer's hourly rate for the advice given.)



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  • CreatedFebruary 26, 2015
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