Two accounting students were discussing the timing of revenue recognition for long-term construction contracts. The discussion focused
Question:
Two accounting students were discussing the timing of revenue recognition for long-term construction contracts. The discussion focused on which method was most like the typical revenue recognition method of recognizing revenue at the point of product delivery. Bill argued that recognizing revenue upon project completion was preferable because it was analogous to recognizing revenue at the point of delivery. John disagreed and supported recognizing revenue over time, stating that it was analogous to accruing revenue as a performance obligation was satisfied. John also pointed out that an advantage of recognizing revenue over time is that it provides information sooner to users.
Required:
Which argument do you support—Bill’s or John’s? Why?
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1260481952
10th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas