Intermediate 2 Terry Part #4: Revenues

To practice correcting the financial statements for different revenue recognition situations. (See Topic Guides IFO 4 and 23).

Information:

Terry determined early in its history that it was more effective for them to build their own specialized production equipment than for them to share their proprietary production data with a construction company. While this process leads to a larger upfront cost for new equipment, the special production methods used by the company have earned much more than the initial extra outlay.

While the company has historically kept this production process in-house, they have recently been approached by a local university with a request to provide a set of machinery that the university can use to produce their own specialty bags. Since many members of Terrys Board of Directors (and several large shareholders) are alumni of this university, Terrys management has decided that they will go through with the sale of a three machine system to the university.