tailieunhanh - Lecture Intermediate accounting (Volume 1, 11th Canadian edition) – Chapter Appendix 6: Revenue recognition
Chapter Appendix 6 - Revenue recognition. After studying this Appendix 6A, you should be able to: Apply the percentage of completion method for long-term contracts, apply the completed-contract method for long-term contracts. | 1 CHAPTER 6: REVENUE RECOGNITION 2 2 Chapter 6: Revenue Recognition After studying this Appendix 6A, you should be able to: Apply the percentage of completion method for long-term contracts Apply the completed-contract method for long-term contracts 3 3 Revenue Recognition 4 4 Percentage-of-Completion: Earnings Approach The amount of revenues, costs and gross profit recognized on long term contracts depends upon the percentage of work done Application of percentage-of-completion method requires a basis for measuring the progress toward completion at interim dates, and is based on significant judgement Can use input measures (. costs incurred—which is the most popular method—or labour hours worked) Can use output measures (. storeys of a building completed, tonnes produced) 5 5 LO12 Percentage-of-Completion: Steps Costs incurred to date = Percent complete Most recent estimated total costs 1 Percent complete x Estimated total revenue (or GP) = Revenue to be recognized to date 2 Revenue (or GP) to be recognized to date – Revenue (or GP) recognized in prior periods = Current period revenue (or GP)* *Current period revenue – Current costs = Gross Profit 3 4 6 6 LO12 Percentage-of-Completion: Cost-to-Cost Basis Data: Contract price: $4,500,000 Estimated cost: $4,000,000 Start date: July, 2017 Finish: October, 2019 Balance sheet date: December 31st Given: 2017 2018 2019 Costs to date $1,000,000 $2,916,000 $4,050,000 Estimated costs to complete $3,000,000 $1,134,000 $ -0- Progress billings during year $ 900,000 $2,400,000 $1,200,000 Cash collected during year $ 750,000 $1,750,000 $2,000,000 7 7 LO12 Percentage-of-Completion: Cost-to-Cost Basis 2017 2018 2019 $4,500,000 $4,500,000 $4,500,000 Contract Price (a) 1,000,000 2,916,000 4,050,000 3,000,000 1,134,000 -0- 4,000,000 4,050,000 4,050,000 Less: Estimated Costs Costs to Date Est. Cost to Complete Est. Total Costs (b) 25% 72% 100% 1,000,000 2,916,000 4,050,000 4,000,000 4,050,000 4,050,000 Percent Complete $ . | 1 CHAPTER 6: REVENUE RECOGNITION 2 2 Chapter 6: Revenue Recognition After studying this Appendix 6A, you should be able to: Apply the percentage of completion method for long-term contracts Apply the completed-contract method for long-term contracts 3 3 Revenue Recognition 4 4 Percentage-of-Completion: Earnings Approach The amount of revenues, costs and gross profit recognized on long term contracts depends upon the percentage of work done Application of percentage-of-completion method requires a basis for measuring the progress toward completion at interim dates, and is based on significant judgement Can use input measures (. costs incurred—which is the most popular method—or labour hours worked) Can use output measures (. storeys of a building completed, tonnes produced) 5 5 LO12 Percentage-of-Completion: Steps Costs incurred to date = Percent complete Most recent estimated total costs 1 Percent complete x Estimated total revenue (or GP) = Revenue to be recognized to date 2 .
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