When percentage-of-completion accounting is not appropriate, U.S. GAAP requires the use of the completed contract method, while IFRS requires the use of the cost recovery method. Explain how the two methods affect recognition of revenue, cost of construction, and gross profit over the life of a profitable contract.
Answer to relevant QuestionsPeriodic billings to the customer for a long-term construction contract are recorded as billings on construction contract. How is this account reported in the balance sheet?Show the calculation of the following profitability ratios: (1) The profit margin on sales, (2) The return on assets, and (3) The return on shareholders' equity.What information about a company do these ratios offer?Meyer Furniture sells office furniture mainly to corporate clients. Customers who return merchandise within 90 days for any reason receive a full refund. Discuss the issues Meyer must consider in determining its revenue ...Collins, Inc., entered into a 10-year franchise agreement with an individual. For an initial franchise fee of $40,000, Collins agrees to assist in design and construction of the franchise location and in all other necessary ...On July 1, 2011, the Foster Company sold inventory to the Slate Corporation for $300,000. Terms of the sale called for a down payment of $75,000 and three annual installments of $75,000 due on each July 1, beginning July 1, ...
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