Question

E5-33. Assessing Revenue Recognition Timing Explain when each of the following businesses fulfills the performance obligations implicit in the sales contract. a. A clothing retailer like American Eagle Outfitters Inc. b. A contractor like Raytheon Company that performs work under long-term government contracts. c. A grocery store like Supervalu Inc. d. A producer of television shows like MTV that syndicates its content to television stations. e. A residential real estate developer that constructs only speculative houses and later sells these houses to buyers. f. A banking institution like Bank of America Corp. that lends money for home mortgages. g. A manufacturer like Harley-Davidson Inc. h. A publisher of magazines such as Time-Warner Inc.

Answer 1

Solution:

The Following businesses fulfills the performance obligations implicit in the sales contract when:

a. When the stock comes into the warehouse of the retailer and after that it is been presented in the shop as display, then it is treated into sales contract.

b. When the contracting company agrees to the terms and conditions of the contractor and when 40% of the work has started.

c. When the items are sold to customer.

d. When the television show is broadcasted for the public.

e. When the buyer has already deposited the token money or substantial portion of the constructing flat and the contract has been signed duly.

f. When loan is sanctioned in the name of the person and the contract is fully signed by him agreeing to the interst rate.

g.For the manufaturers , when goods or product is being produced or manufactured compltely and when it is ready to sell .

h. When a magazine is published at a whole or part of it is made.