Question

Dowell Manufacturing contracts to produce bumper cars for Five Flags Parks. Under the terms of the contract, Five Flags will pay Dowell a total of $60,000 when bumper cars are delivered six months later, and Five Flags can cancel the contract but must pay $48,000 to Dowell. Dowell believes that, if Five Flags cancelled the contract, Dowell could sell the bumper cars to another park. As of December 31, 2020, the job is 20% complete. How much revenue should Dowell recognize in 2020 for this contract? O a. $0 O b. $12,000 Oc. $30,000 $48,000 d. $60,000 e.

Answer 1

Answer:

Under the given Case, there is only a contract between the two parties and there is no revenue recognized till now, Since the job completion is only 20% . And also revenue will be recognized only when the title of the goods transferred from buyer to seller. Since job is only 20% completed and title remains with the Dowell, revenue recognized from the Contract is ' 0 '

Option (a) is Correct