On January 15, 2021, Leno, Inc., which is a clothing manufacturer, enters into a contract with...

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On January 15, 2021, Leno, Inc., which is a clothing manufacturer, enters into a contract with Gavin Corp. (not a regular customer of Leno's traditional business model) to sell a piece of empty land for $10 million. A clear contract exists between the two parties, the land is the only performance obligation, and the full trancaction price is $10 million. The contract was executred on September 1, 2021, at which point title to the land transferred and the transaction price was paid in cash, in full. Leno, Inc., bought land 15 years ago at a price of $1 million. Required: a. Based on relevant accounting pronouncements for the sale of real estate (ASC 610-20), how should Leno, Inc., account for the transaction at September 1, 2021? b. What evidence should the auditor examine while testing for any gain on the transaction? On January 15, 2021, Leno, Inc., which is a clothing manufacturer, enters into a contract with Gavin Corp. (not a regular customer of Leno's traditional business model) to sell a piece of empty land for $10 million. A clear contract exists between the two parties, the land is the only performance obligation, and the full trancaction price is $10 million. The contract was executred on September 1, 2021, at which point title to the land transferred and the transaction price was paid in cash, in full. Leno, Inc., bought land 15 years ago at a price of $1 million. Required: a. Based on relevant accounting pronouncements for the sale of real estate (ASC 610-20), how should Leno, Inc., account for the transaction at September 1, 2021? b. What evidence should the auditor examine while testing for any gain on the transaction?

Answer rating: 100% (QA)

Step 1 Q1 On its earnings report Leno Inc need to embrace the profit it made of the sale of the land as operational revenue this can be because of the ... View the full answer