Revenue Recognition

| July 29, 2018

PROBLEM#
5: Revenue Recognition
Identify when each
of the following companies should recognize revenue.
(i) Before production begins, (ii) cash
collection, (iii) after replacement cost are recovered, (iv) point of sale, (v)
completion of product, and (vi) during production.AND
Discuss any income measurement risks that
could arise.
(i) Persuasive evidence of arrangement,
(ii) delivery has occurred/ services have been rendered, (iii) price is fixed
or determinable, (iv) collectability is assured.
a. Real Money provides investment advice to customers
for an upfront fee. It provides these customers with password-protected access
to its Website where customers can download investment reports. Real Money is
obligated to provide updates on its website.
b. Boeing –
airplane manufacturer whose revenue is derived largely from long-term
fixed-price contracts with airlines
c. Wells
Fargo – large commercial bank that earns interest on loans
d. Harley
Davidson – manufactures and retails motorcycles, provides financing for dealers
and customers

Point of revenue

Risks

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