American company inc. is a company with three division’s namely American construction, American publishing and American securities divisions. Below is information about each division as of October 31, 2017 when the accounting year ended. American construction division this division has $30,000,000 construction project which was granted in May 2017. The company began construction of the project on July 1, 2017. Estimated costs of completion at the contract date were $25,000,000 over a 2-year time period from contract date. As of fiscal year end, construction costs of $7,200,000 had been incurred and progress billings of $9,500,000 had been made. On October 31, 2017, the construction costs to complete the project were estimated to be $16,800,000 because of an expected decline in raw materials costs. The division utilizes percentage-of-completion method to recognize revenue. American publishing division this division sells large volumes of novels to book distributors who will then sell to bookstores. The distributors are allowed to return up to 30% of sales but over the past several years, the average is 20% return. In 2017, the division has sold books worth $7,000,000 to distributors. On October 31, 2017, $1,500,000 worth of books can still be returned while the remaining $5,500,000 had actual return rate of 21%. The division recognizes revenue when sales occur but take into consideration right of return. American securities division this division serves as an agent for home and business security systems. Customers are billed directly for the systems plus actual shipping costs. The company received orders for $6,000,000 of goods during the fiscal year 2017. $5,200,000 of goods were billed and shipped and payments of $600,000 were received. Actual shipping costs of $100,000 were also billed. The division pays commissions of 10% on product price to manufacturing agents after goods are shipped to customers. The division uses revenue recognition at point of sale.

Required for each division,

Calculate the revenue to be recognized for fiscal year ended October 31, 2017

Answer rating: 100% (QA)

American Construction Division Contract price 30 000 000 Estimated costs of completion 25 000 000 in ... View the full answer