Intermediate Accounting 3321

When recognizing revenue from a construction type long term contract over time, the balance in the CIP account includes (Select all that apply.)

- costs of labor - gross profit and losses - materials used

Proportion of total units produced or delivered to date, achievement of specific milestones, and appraisals reflect estimation methods referred to as:

output method

Revenue related to a company providing cleaning services to a customer for a period of time should be recognized

over time.

Xavier Inc. is adding two more floors to Tamara Company's existing office building. Revenue related to this service likely should be recognized

over time.

The essential difference between revenue recognition over time and upon completion relates to the

pattern of recognition of the related gross profit.

An essential characteristic of a contract is that all parties to the contract are committed to

performing their obligations and enforcing their rights

A seller may recognize variable consideration only if it is ______ that there will not be significant reversals with respect to the amount that will be received in the future.

probable

A shortcoming of the output method for estimating progress toward completion is that it may

provide a distorted view of actual completion

A seller recognizes contract liabilities, contract assets, and accounts receivable on separate lines of its . (Enter one word per blank.)

Blank 1: balance Blank 2: sheet

A seller recognizes contract liabilities, contract assets, and accounts receivable on separate lines of its _____ _____ . (Enter one word per blank.)

Blank 1: balance Blank 2: sheet

If a contract qualifies for revenue recognition over time, revenue is recognized based on progress toward _____ . (Enter only one word.)

Blank 1: completion

Goods or services that are not distinct are ______ and treated as (a) ______ performance obligation(s).

combined; single

The billings on construction account is a contra account to

construction in progress.

The billings on construction contract account is classified as a(n)

contra asset.

From a financial reporting perspective the "sales returns" account is a:

contra-revenue

At the end of the period, if construction in progress exceeds billings on construction contracts, it is recorded as a(n)

contract asset.

For a promise to provide a good or service to be accounted for as a separate performance obligation, the good or service must be

distinct from other goods and services in the contract.

Kline Corp. recognizes revenue over time to account for long-term contracts. The contract price is $5 million total construction costs are $3.75 million and actual cost incurred during the first year are $1.5 million. Calculate the revenue recognized during year 1.

$2 million Reason: The cost-to-cost ratio is $1.5/$3.75 = 40%. Multiply 40% (the percentage completed) by the total expected gross profit on the contract ($5) = $2 million revenue recognized in year 1.

Mueller Company sold merchandise costing $120,000 for $240,000. Mueller estimates that merchandise costing $5,000 will be returned for a refund of $10,000. Mueller should report net sales of:

$230,000 Reason: $240,000 - $10,000

James Corporation is an agent of Alten Corporation. Their agreement specifies that James will receive a commission equal to 15% of the sales price. During May, James sells goods with a sales price of $200,000 for Alten. For the month ended May 31, James Corporation should recognize revenue of:

$30,000 Reason: $200,000 x .15

Megan Corp. recognizes revenue over time to account for long-term contracts. At the date the contract is signed, the price is $600,000 and the expected costs to complete the contract are $400,000. The following information is available: Costs incurred to date Year 1 $200,000 Year 2 $350,000 Year 3 $500,000 Estimated costs to complete Year 1 200,000 Year 2 150,000 Year 3 0 Progress billings Year 1 200,000 Year 2 200,000 Year 3 200,000 What is the amount of gross profit or loss that is recognized in year 2?

$30,000 loss Reason: In year 1, the project is 50% complete and the expected total gross profit is $200,000. The company would have recognized $100,000 of gross profit in year 1. In year 2, the project is 70% complete and the expected total gross profit is reduced to $100,000. A total of $70,000 gross profit should be recognized at the end of year 2. $100,000 was recognized in year 1 so a $30,000 loss is recognized in year 2. $100,000 year 1 gross profit less $30,000 loss = $70,000 gross profit to date.

Which of the following likely will lead to revenue recognition at a point in time? (Select all that apply.)

- Buyer has accepted the asset - Buyer has legal title to the asset

Which of the following are key indicators that control of goods or services has been transferred to the customer? (Select all that apply.)

- Customer accepted asset - Customer has legal title to the asset - Customer has physical possession of the asset

Which of the following are key indicators that control of goods or services has been transferred to the customer? (Select all that apply.)

- Customer accepted the risks and rewards of ownership - Customer has legal title to the asset - Customer has an obligation to pay

Deferred revenue from the sale of gift cards is classified as a(n) _____ on the balance sheet. (Enter only one word.)

Blank 1: liability

Agreements that allow customers to use the seller's intellectual property are referred to as _____ . (Enter only one word.)

Blank 1: licenses or license

Revenue is recognized when the _____ obligation is satisfied. (Enter one word.)

Blank 1: performance

The stand-alone price of a good or service may be estimated using the adjusted market assessment approach, the expected cost plus margin approach, or the _____ approach. (Enter only one word.)

Blank 1: residual

The _____-______ selling price is the amount at which the good or service is sold separately under similar circumstance. (Enter one word per blank.)

Blank 1: stand Blank 2: alone

The _____ price is the amount the seller expects to be entitled to receive from the customer in exchange for providing goods and services. (Enter only one word.)

Blank 1: transaction

A contract is said to have _____ consideration if the price depends on the outcome of future events. (Enter only one word.)

Blank 1: variable or varying

A quality-assurance _____ obligates the seller to make repairs or replace products that later are found to be defective or unsatisfactory. (Enter only one word.)

Blank 1: warranty

When revenue is recognized on long-term construction projects, a journal entry is recorded to recognize revenue and cost of goods sold. The difference between revenue and cost of goods sold (gross profit) is recognized in which account?

Construction in progress

When revenue is recognized upon completion of a long-term contract, gross profit is recognized upon completion in which account?

Construction in progress

Related to long-term construction contracts, at the end of the period which accounts are netted?

Construction in progress and billings on construction contracts.

Why are estimated losses on an entire long-term project fully recognized in the first period the loss is anticipated?

Construction in progress would be valued at an amount greater than the company expects to realize from the contract.

The concept or principle that states that companies should recognize revenue when goods or services are transferred to customers for the amount the company expects to be entitled to receive in exchange for goods and services is referred to as the:

Core revenue recognition principle

In a consignment, the entity who owns the goods, referred to as the ______, physically transfers the goods to another company, called the ______, who will attempt to sell the goods.

consignor; consignee

The cost of a quality-assurance warranty is recognized

during the period of sale.

At the end of a long-term construction project, the amounts in the construction in progress account will be ______ the billings on construction contract.

equal to

For the purpose of allocating the transaction price to multiple performance obligations, if a stand-alone selling price cannot be directly observed, the seller should

estimate it.

Because the exact cost of a quality-assurance warranty is unknown when the related product is sold, the cost is

estimated and accrued during the year of sale.

For estimating variable consideration, if there are several possible outcomes, the ______ method will tend to be most appropriate; if there are two possible outcomes, the ______ method will tend to be most appropriate

expected value; most likely amount

A contract is said to have variable consideration if the price depends on the outcome of

future events

Estimated losses on the entire long-term project are recognized immediately because otherwise the CIP account would be valued at an amount ______ the amount the company expects to realize on the contract.

greater than

The construction in progress account represents the total construction costs (labor, material, overhead) and

gross profit recognized to date.

Typical costs included in a construction project include

labor, materials, and overhead.

Estimates relating to long-term contracts

must be periodically updated.

As a practical matter, a seller can assume the time value of money is not significant if the period between delivery and payment is less than

one year.

Revenue is typically recognized ______ for a license that provides the customer with the right of access to the seller's intellectual property.

over the license period

Revenue recognized each period is determined by multiplying total estimated revenue by

percentage completed to date and subtracting revenue recognized in prior periods

Variable consideration can only be recognized if it is

probable that the amount will be received in the future.

The cost-to-cost ratio is the most common approach used to estimate _____ .

progress toward completion

The cost-to-cost ratio is the most common approach used to estimate ______.

progress toward completion

The amount of revenue that is recognized each period for a long-term contract that qualifies for revenue recognition over time is determined based on

progress toward completion.

It is important to distinguish between a principal and an agent because the principal recognizes revenue to the extent of the

sales price

A right of return ______ a separate performance obligation for the seller.

does not create

Robbie Inc. estimated that it will receive $60,000 of consideration for providing services to Stan Company over a 6-month period. Robbie properly accrues $10,000 each month; after three months, Robbie estimates that the total consideration it will receive is only $25,000. When the estimate change is determined, the company should debit ______ and credit ______ for ______.

service revenue; contract receivable; $17,500 Reason: $25,000 × 3/6 = $12,500; $12,500 - ($60,000 × 3/6) = ($17,500)

The billings on construction account represents

the amount billed to customers to date.

What journal entry should be made to recognize accounts receivable for long-term construction projects?

Debit Accounts Receivable and Credit Billings on Construction Contract

On January 1st, Guarder Consulting enters into a one-year contract with Smith Co. to restructure some of Smith's processes with a goal of cost savings. Smith pays Guarder an up-front fixed fee of $48,000 on January 1st. Guarder will also earn an additional $12,000 bonus if Smith achieves $100,000 of cost savings. Guarder estimates a 70% chance that Smith will achieve $100,000 of cost savings. What journal entry will Guarder make on January 1st to recognize the up-front cash payment?

Debit cash $48,000, credit deferred revenue $48,000

What is the journal entry to recognize a loss on long-term contracts?

Dr: Cost of Construction; Cr: Revenue from Long-Term Contracts and Cr: Construction in Progress

The construction-in-progress account most closely relates to which type of account?

Inventory

Virginia Corp. recognized deferred revenue for cash received on a multi-year contract that also provides for variable consideration (bonus) if certain targets are met by the end of the contract period. Which of the following statements are true if Virginia Corp revises its estimate of variable consideration in subsequent years?

It must reflect the adjustment in that year's revenue.

Munch Inc. delivers various types of construction materials to a customer's building site. Over an 18-month period, Munch's employees utilize Munch's machinery and tools to construct a new office building for the customer. Munch identifies only one performance obligation related to this contract because

Munch combines the materials, labor, and use of machinery and tools to construct a single complete building.

True or false: Most long-term contracts should be viewed as single performance obligations.

True Reason: Most are viewed as single performance obligations because a single bundled product or service is delivered.

True or false: An estimated overall loss on a long-term contract is fully recognized in the first period the loss becomes evident, regardless of the revenue recognition method used.

True Reason: The loss is recognized in the first period it is anticipated.

True or false: Updated estimates related to contracts for which revenue was recognized during prior periods may necessitate recognition of losses.

True Reason: changes in estimates may necessitate recognition of losses.

The construction in progress account is equivalent to which account in a manufacturing environment?

Work-in-process

Sales commission revenue is recognized by the ______.

agent

Star Inc. licenses use of its intellectual property to customers. The benefit the customer receives from the license is not affected by Star's ongoing activity. Star should recognize revenue:

at the beginning of the license period

For licenses of functional intellectual property, revenue is typically recognized

at the start of the license period.

When the time value of money is significant, the transaction price is allocated

between the merchandise and the financing component

Jonathan is estimating the amount of variable consideration for a specific contract. In deciding which estimation method to use, Jonathan should choose the one that

best predicts the amount he will receive.

On January 5, Merkel Inc. purchases office equipment for its new branch office from Norbert Company. Merkel requests that the equipment be delivered after the renovation of the branch location is completed. This agreement is referred as a:

bill-and-hold arrangement

The amount billed to customers on long-term construction project is recorded in the

billings on construction account.

In a bill-and-hold arrangement, the ______ requests that the ______ ship the products ______.

buyer; seller; at a later date

If delivery and payment related to the sale of goods occur relatively near each other, the time value of money

can be ignored.

At the end of the period, if construction in progress is less than billings on construction contracts, it is recorded as a(n)

contract liability.

Long-term contracts require careful consideration in identifying performance obligations because these type of contracts typically include many products and services that

could be viewed as separate performance obligations.

Prepayments by customers for future goods or services should initially be recorded as

deferred revenue.

Fuller contracted with the owners of "Healthy Bakeries" to open a bakery, sell its signature products and use its name and logo. This agreement refers to a

franchise

When one party to an agreement grants the right to sell its products and use its name to another party, we refer to the arrangement as a:

franchise

For a particular contract, the timing of revenue recognition is determined

individually for each performance obligation.

Progress toward completion can be measured based on the proportion of effort expended thus far relative to the total effort expected to satisfy a performance obligation. This is referred to as a(n)

input method.

Licenses typically allow customers to use the seller's ______ property.

intellectual

Gerhard Inc. sells airline tickets for New World Global Airlines. Gerhard Inc. receives a 8% commission on the sales price of the tickets. During July, Gerhard Inc. sells $1 million of tickets for New World Global Airlines. Gerhard Inc. should record

sales commission revenue for $80,000 Reason: 8% of 1 million

On a long-term construction project, the amount in the construction in progress account represents the costs of construction plus the gross profit recognized to date, and the billings on construction represents

the amounts billed to the customer.

Revenue is recognized upon completion of a long-term contract if:

the contract does not qualify for revenue recognition over time

Gerhard Inc. sells merchandise to a customer with a long payment period. Gerhard determines that the time value of money related to this transaction is significant. Gerhard should allocate the

transaction price between the merchandise cash price and the financing component.

Which of the following differs between revenue recognized over time and revenue recognized at completion?

The timing of recognition

Guarder Consulting enters into a contract with Smith Co. to restructure some of Smith's processes with a goal of cost savings. The contract states that Guarder will earn a fixed fee of $35,000 and earn an additional $10,000 bonus if Smith achieves $100,000 of cost savings. Guarder estimates a 55% chance that Smith will achieve $100,000 of cost savings. Assuming that Guarder determines the transaction price as the expected value of consideration, what transaction price will Guarder estimate for this contract?

$40,500 Reason: $45,000 x 55% = $24,750 $35,000 x 45% = $15,750

Guarder Consulting enters into a contract with Smith Co. to restructure some of Smith's processes with a goal of cost savings. The contract states that Guarder will earn a fixed fee of $35,000 and earn an additional $10,000 bonus if Smith achieves $100,000 of cost savings. Guarder estimates a 55% chance that Smith will achieve $100,000 of cost savings. Assuming that Guarder determines the transaction price as the most likely amount, what transaction price will Guarder estimate for this contract?

$45,000 Reason: This is the expected value amount. There is a 55% chance that the bonus will be earned so the most likely amount is $35,000 + $10,000.

On January 1st, Guarder Consulting enters into a one-year contract with Smith Co. to restructure some of Smith's processes with a goal of cost savings. Smith pays Guarder an up-front fixed fee of $48,000 on January 1st. Guarder will also earn an additional $12,000 bonus if Smith achieves $100,000 of cost savings. Guarder estimates a 70% chance that Smith will achieve $100,000 of cost savings. Assuming that Guarder determines the transaction price as the most likely amount, what amount of revenue will be recorded at the end of the first month?

$5,000 Reason: $4,000 of the up-front fee plus $1,000 of the bonus will be recognized each month

Linx Corp. recognizes revenue over time to account for long-term construction contracts. The contract price is $1,000,000 and the estimated costs to complete the project are $500,000 on the date the contract was signed. Linx subsequently has the following information: Costs incurred to date Year 1 $200,000 Year 2 $315,000 Year 3 $800,000 Estimated costs to complete Year 1 300,000 Year 2 385,000 Year 3 0 Progress billings Year 1 250,000 Year 2 250,000 Year 3 500,000 Linx recognized $200,000 of gross profit during year 1. What is the gross profit or loss recognized in year 2

$65,000 loss Reason: In year 1, the project is 40% complete and the expected total gross profit is $500,000. The company would have recognized $200,000 of gross profit in year 1. In year 2, the project is 45% complete and the expected total gross profit is reduced to $300,000. A total of $135,000 gross profit ($300,000 x 45%) should be recognized at the end of year 2. $200,000 was recognized in year 1 so a $65,000 loss is recognized in year 2. $200,000 year 1 gross profit less $65,000 loss = $135,000 gross profit to date.

Rice Corp. recognizes revenue over time to account for long-term contracts and has the following information for the first year of the contract: Contract price $500,000 Total expected costs on contract 400,000 Costs incurred in current year 60,000 Costs incurred in previous years 0 What is the amount of revenue recognized in year 1?

$75,000 Reason: The cost-to-cost ratio is $60,000/$400,000 = 15%. Multiply 15% (the percentage completed) by the total contract price of $500,000 = $75,000 revenue

Margery sells 100 TV top boxes to customers for $90 each. Margery estimates that 6% of the units will be returned for a full refund. Margery should report net sales revenue of:

$8,460 Reason: $9,000 - (9,000 x 0.06) = $8,460

Which of the following must a seller recognize as separate line items on the balance sheet? (Select all that apply.)

- Accounts receivable - Contract liabilities - Contract assets

Which of the following methods of estimating progress toward completion represent output-type measures? (Select all that apply.)

- Achievement of milestones - Number of units produced or delivered - Appraisal of performance completed to date

Which methods may be used to estimate the stand-alone prices of goods and services? (Select all that apply.)

- Adjusted market assessment approach - Residual approach - Expected cost plus margin approach

Which of the following conditions will cause revenue to be recognized over time? (Select all that apply.)

- Customer controls the asset as it is created - Seller creates an asset that has no alternative use, and the seller has the right to receive payment for progress to date. - Customer consumes the benefit of the seller's work as it is performed

Kline Corp. recognizes revenue over time to account for long-term contracts. The contract price is $5 million, total construction costs are $3.75 million, actual costs incurred during the first year are $1.5 million, and the revenue recognized is $2 million. The journal entry to record revenue during year 1 is: (Select all that apply.)

- Debit: Cost of construction $1.5 million - Credit: Revenue $2 million - Debit: CIP $500,000

Which of the following situations may make the contract price less apparent? (Select all that apply.)

- Determining whether the seller is acting as principal or agent - Variable consideration provisions - Sales with right of return

Which of the following costs must be excluded from the calculation of the cost-to-cost ratio? (Select all that apply.)

- Inefficiencies related to the project - Costs that don't reflect progress toward completion

What method(s) can be used to estimate progress toward completion for the purpose of recognizing revenue over time? (Select all that apply.)

- Input method - Output method

Which of the following services are commonly performed over time? (Select all that apply.)

- Lending of money - Financial statement audits - Consulting engagements

Which of the following methods are appropriate for estimating variable consideration? (Select all that apply.)

- Most likely amount that will be received - Expected value

Which of the following support the conceptual basis for separating contractual promises into several performance obligations? (Select all that apply.)

- Promises that can be viewed on a stand-alone basis should be separated - Financial statements better reflect timing of transfer of goods and services

Which statements are true regarding revenue recognition over time and upon completion? (Select all that apply.)

- The same total amount of gross profit is recognized under both methods. - Revenue recognition over time provides a more realistic measure of a project's periodic performance.

Which of the following situations may make the contract price less apparent? (Select all that apply.)

- The time value of money - Variable consideration provisions - Payment by the seller to the customer

Which of the following will not differ between revenue recognized over time and revenue recognized at completion? (Select all that apply.)

- Total expense - Total revenue - Total profit

Gerhard Inc. sells airline tickets for New World Global Airlines. Gerhard Inc. receives a 8% commission on the sales price of the tickets. During July, Gerhard Inc. sells $1 million of tickets with a cost of $750,000 for New World Global Airlines. New World Global Airlines should record (select all that apply)

- cost of tickets sold for $750,000 - sales revenue for $1 million

Which of the following can be used as indicators of progress toward completion under the input method? (Select all that apply.)

- costs incurred - labor hours expended - machine hours used

Jackson Corp. recognizes revenue over time to account for long-term construction contracts. In year 3, Jackson anticipates a loss on the contract for $50,000. In year 3, Jackson recognizes revenues of $800,000 and has $850,000 in construction costs. Indicate which of the following are included in the journal entry at year-end to recognize revenues and profit/loss on the contract. (Select all that apply.)

- credit construction in progress $50,000 - credit revenue from long-term contracts $800,000 - debit cost of construction $850,000

Which of the following are included in the journal entry required to record the collection of cash from a customer related to a long-term construction contract? (Select all that apply.)

- debit cash - credit accounts receivable

Which of the following are included in the journal entry required to record construction costs for a long-term construction contract? (Select all that apply.)

- debit construction in progress - credit raw materials

When revenue related to a long-term construction contract is recognized over time, the journal entry to recognize revenue includes which of the following? (Select all that apply.)

- debit construction in progress - credit revenue from long-term contracts - debit cost of construction

Which of the following costs are included in a long-term construction contract? (Select all that apply.)

- direct material - direct labor - overhead

Prepayments for future goods or services should be (Select all that apply.)

- included in the transaction price - allocated to the various performance obligations in the contract

Principal - Agent - Third Party -

- matches Choice Carries risks and rewards associated with collecting the contract price - matches Choice Earns a commission for helping seller transact with buyer - matches Choice Is not directly involved with the transaction

Principal - Agent - Third Party -

- matches Choice Has primary responsibility for delivering goods or services - matches Choice Acts as a facilitator for helping seller transact with buyers - matches Choice Is not directly involved in a transaction.

A license for symbolic intellectual property (Select all that apply.)

- provides the customer with the right of access to the intellectual property - does not have significant standalone functionality

Which of the following are often provided by the franchisor at start-up of a new franchise? (Select those that apply at start-up)

- training of franchisee's employees - remodeling of franchisee's facilities

The cost of a quality-assurance warranty is recognized during the year of sale and debited to ______ and credited to ______.

- warranty expense - contingent warranty liability

Robbie Inc. estimated that it will receive $60,000 of consideration for providing services to Stan Company over a 6-month period. Robbie properly accrues $10,000 each month; after two months, Robbie estimates that the total consideration it will receive is only $50,000. For each of the remaining months, Robbie should recognize service revenue of:

8,333 Reason: $50,000/6 = $8,333 per month

When is gross profit recorded in the construction in progress account for a long-term contract accounted for upon completion?

At the completion of the contract.

If Company A physically transfers goods to another company to sell on its behalf, but Company A retains title to the goods, this is referred to as a _____ . (Enter only one word.)

Blank 1: consignment

From a financial reporting perspective the "sales returns" account is a(n) ______-_______ account. (Enter one word per blank.)

Blank 1: contra Blank 2: revenue

Cash received from the sale of gift cards is recognized as _____ revenue. (Enter only one word.)

Blank 1: deferred or unearned

In a franchise agreement, the ______ owns the company and gives an individual the right to use its name and sell its products.

Blank 1: franchisor

In a franchise arrangement, the _____ grants to the _____ the right to sell products and use its name.

Blank 1: franchisor Blank 2: franchisee

Methods that can be used to estimate progress toward completion are referred to as ____-based and _____-based methods. (Enter one word per blank.)

Blank 1: input or input-based Blank 2: output or output-based

A contract is an agreement that creates _____ enforceable rights and obligations. (Enter only one word.)

Blank 1: legally or legal

Which of the following is most commonly used to estimate progress toward completion of a long-term contract?

Cost-to-cost ratio

What is the journal entry to recognize gross profit when revenue is recognized upon completion of a long-term construction project?

Debit Construction in Progress and Debit Cost of Construction; Credit Revenue from Long-Term Contracts

What is the correct journal entry to recognize profit for a long-term construction project for which revenue is recognized over time?

Debit construction in progress and debit cost of construction; credit revenue from long-term contracts

Margery sells 100 TV top boxes to customers for $90 each and credited sales revenue for $9,000. Margery estimates that six of the units will be returned for a full refund of $540. What additional journal entry should Margery make?

Debit sales returns and credit refund liability

True or false: A right of return represents a performance obligation.

False Reason: Not a separate performance obligation.

True or false: A quality-assurance warranty is a separate performance obligation.

False Reason: Represents the cost of satisfying the obligation to deliver products of acceptable quality; its is not a separate performance obligation.

When is a loss recognized on a long-term contract?

In the first period in which the loss become evident.

What account tracks the inflow of net assets that occurs when a business provides goods or services to its customers?

Revenues

Peter Inc. recognized deferred revenue for variable consideration under a multi-year contract. Which of the following correctly describes the requirement in subsequent years related to the estimated variable consideration?

The estimate must be reassessed each period

What is the difference between journal entries to recognize gross profits when revenue is recognized over time and when revenue is recognized upon completion of a long-term project?

Timing

A transaction price may be uncertain because the price

depends on the outcome of future events.

The formula: total estimated revenue times percentage completed to date less revenue recognized in prior periods is used to measure:

revenue recognized for the current period

Inflows or other enhancements of assets or settlements of an entity's liabilities from delivering or producing goods, rendering services, or other activities that constitute its ongoing major or central operations are ______.

revenues

The potential that a good does not satisfy the original performance obligation is addressed through a customer's:

right of return

In a principal-agent relationship, the agent recognizes revenue to the extent of the

sales commission

A long-term contract that includes many products and services that are capable of being distinct, may be accounted for as a single performance obligation because

the seller's role is to combine those products and services prior to delivery or completion.

The journal entries used to recognize the costs of long-term construction contracts are identical when revenue is recognized upon completion and when it is recognized over time; however the two methods differ with respect

to the timing of revenue recognition.

The amount the seller expects to be entitled to receive from the customer in exchange for providing goods or services is referred to as the

transaction price.

The core revenue recognition principle stipulates that companies recognize revenue when goods or services are

transferred to customers

If a long-term contract doesn't qualify for revenue recognition over time, revenue is recognized ______.

upon completion

When revenue is recognized upon completion of a long-term contract, CIP is updated to include gross profit

upon completion.