Revenue Arrangements
Answer the following questions in the Discussion Board:
- Briefly describe the five-step process.
- Explain the importance of contracts when analyzing revenue arrangements.
- How are fair value measurement concepts applied in the implementation of the five-step process?
- How does the five-step process reflect application of the definitions of assets and liabilities?
Percentage of Completion Method
Widjaja Company is accounting for a long-term construction contract using the percentage-of-completion method. It is a 4-year contract that is currently in its second year. The latest estimates of total contract costs indicate that the contract will be completed at a profit to Widjaja Company.
Answer the following questions in the Discussion Board:
- What theoretical justification is there for Widjaja Company’s use of the percentage-of-completion method?
- How would progress billings be accounted for? Include the classification of progress billings in the Widjaja Company financial statements.
- How would the income recognized in the second year of the 4-year contract be determined using the cost-to-cost method of determining the percentage of completion?
- What would be the effect on earnings per share in the second year of the 4-year contract of using the percentage-of-completion method instead of the completed-contract method? Discuss.
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2022). Intermediate accounting (18th ed.). Wiley.
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