18 Revenue Recognition CHAPTER LEARNING OBJECTIVES 1. Describe and apply the revenue recognition principle. 2. Describe accounting issues for revenue recognition at point of sale. 3. Apply the percentage-of-completion method for long-term contracts. 4. Apply the completed-contract method for long-term contracts. 5. Identify the proper accounting for losses on long-term contracts. 6. Describe the installment method of accounting. 7. Explain the cost recovery method of accounting. *8
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1. Is Eye Vision’s arrangement with Holland Hospital within the scope of ASC 985-605‚ Software: Revenue Recognition? In this case‚ the main content of the Eye Vision’s arrangement with Holland Hospital include embedded software medical equipment and an initial option to purchase a two-year separately priced maintenance agreement. In this case‚ because“Eye Vision has never sold‚ nor does it offer to sell‚ the Clear View Laser without the embedded software because the software is necessary to perform
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recognized as revenue? A: FASB codification (605-28) milestone method SolvGen Inc. is gonging to use the milestone method to recognize the revenue. The milestone method is a recently issued method of recognizing revenue for research and development arrangements under which consideration to be received by the vendor is contingent upon the achievement of certain milestones(FASB codification (605-28) milestone method). Under the commonly applied milestone method‚ a vendor recognizes revenue in the
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CASES Real World Case 5-1 Requirement 1 A bill and hold strategy accelerates the recognition of revenue. In this case‚ sales that would normally have occurred in 1998 were recorded in 1997. Assuming a positive gross profit on these sales‚ earnings in 1997 is inflated. Requirement 2 A customer would probably not be expected to pay for goods purchased using this bill and hold strategy until the goods were actually received. Receivables would therefore increase. Requirement 3 Sales that would
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purchasor. The software has never been sold without Laser for its functional necessity. In this memo‚ as explained below‚ we conclude that: 1. Eye Vision’s arrangement with Holland Hospital is not within the scope of ASC 985-605‚ Software: Revenue Recognition. 2. The deliverables in this arrangement are the Clear View Laser‚ embedded software‚ and maintenance plan‚ respectively. 3. The Clear View Laser together with embedded software and maintenance plan will be accounted for as separate units
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Site Property Information 22 Site – Equipment 25 Site – Insurance 26 Site – Contact 27 Revenue Transactions 29 Tenant Lease Invoice Creator (Receivables) 29 Without Alternate Tenants 34 With Alternate Tenants 35 Recognition Schedule Entry 36 Journal Entry Processing 44 Create Recognition Journal Entry Action 47 Reverse Recognition Journal Entry Action 47 Stub/Reverse Stub on Recognition Amount 48 Building/Portfolio Maintenance (Cards > Property Site Management > Building
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8 million as a current revenue was that this part of the contract was related to the delivery of the software. Since the product was shipped by the September 30th year-end‚ Longeta thought that they were allowed to do this under the revenue recognition principle. The reasoning for the $1.2 million being recorded as deferred revenue was that this amount corresponded to updates and technical support services which had not been performed at the year-end. This deferred revenue is listed on the liabilities
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that have used these techniques? 5 popular techniques used by companies are: "big bath" restructuring charges‚ creative acquisition accounting‚ "cookie jar reserves‚" "immaterial" misapplications of accounting principles‚ and the premature recognition of revenue. “Big bath” technique: In that technique‚ companies attempt to overload one period with expenses therefore‚ the next accounting period shows an upgrading in earnings. Moreover‚ companies can set up an earnings reserve that can be used
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1:RELEVANCE: Information should be relevant to the decision making needs of the user. Information is relevant if it helps users of the financial statements in predicting future trends of the business (Predictive Value) or confirming or correcting any past predictions they have made (Confirmatory Value). Same piece of information which assists users in confirming their past predictions may also be helpful in forming future forecasts. Example: A company discloses an increase
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are needed for the hardware to work perfectly‚ it cannot be within the scope of ASC 985-605. 2.) On the basis of the response to Question 1‚ discuss the revenue recognition accounting literature that would be applied to each unit of accounting in the February 1‚ 2012‚ arrangement. Provide the cumulative revenue recognized and deferred revenue balance related to the Buffett arrangement as of April 30‚ 2012. Coconut’s February 1‚ 2012 arrangement with Buffet is within the
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