中级财务会计英文ch121课件

RevenueRecognitionChapter12IntermediateAccounting12thEditionKieso,Weygandt,andWarfield

PreparedbyCobyHarmon,UniversityofCalifornia,SantaBarbaraApplytherevenuerecognitionprinciple.Describeaccountingissuesforrevenuerecognitionatpointofsale.Applythepercentage-of-completionmethodforlong-termcontracts.Applythecompleted-contractmethodforlong-termcontracts.Identifytheproperaccountingforlossesonlong-termcontracts.Describetheinstallment-salesmethodofaccounting.Explainthecost-recoverymethodofaccounting.LearningObjectivesRevenuesInflowsofassetsorsettlementsofliabilitiesduringaperiodfromdeliveringorproducinggoodsorservices.ExpensesOutflowsofassetsorincurrenceofliabilitiesduringaperiodfromdeliveringorproducinggoodsorservices.ConceptsRecognitionistheprocessofformallyrecordingandreportingitemsinthefinancialstatements.RevenueRecognitionDefinitionIstheitemanasset,liability,equity,revenue,expense,gain,orloss?MeasurabilityDoesitpossesstheattributesthatpermitreliablemeasurement?RelevanceWillitmakeadifferencetothedecisionmaker?ReliabilityIsitafaithfulrepresentation?RevenueRecognitionRevenueshouldberecognizedinthefinancialstatementwhen...Itisearned,andItisrealizedorrealizable.RevenueRecognitionRevenueisearnedwhentheearningsprocessiscompletedorvirtuallycompleted.Revenueisrealized

whencashisreceived.Revenueisrealizablewhenclaimstocasharereceivedthatcanbeconvertedintoaknownamountofcash.RevenueRecognitionTheeconomicsubstanceoftheeventtakesprecedenceoverthelegalformofthetransaction.Therisksandbenefitsofownershiphavebeentransferredtothebuyer.Thecollectibilityofthereceivablefromthesaleisreasonablyassured.Thedecisionastowhentorecognizerevenuefocusesonthreefactors:RevenueRecognitionRevenuerecognizedAtdelivery(pointofsale)AfterdeliveryBeforedelivery

ofproductorserviceRevenueRecognitionRevenueisearnedandrealizedatthepointofsale.Theproductorservicehasbeendeliveredtothecustomerandcashhasbeenreceivedorisreceivable.Thismethodissometimescalledthe“salesmethod”or“deliverymethod.”RevenueRecognition

PointofSaleAccountingforlong-termconstructioncontractsCompleted-ContractMethodPercentage-of-CompletionMethodRevenueRecognitionBeforeDeliveryPercentage-of-completionmethodisappropriatewhen...--Contractspecifiestheamountofconsiderationtobeexchangedandthetermsofsettlement.--Buyerisexpectedtosatisfytheobligation.--Contractorcanperformaccordingtothetermsofthecontract.RevenueRecognitionBeforeDeliveryInputMeasuresEffortdevotedtoprojectcomparedtototaleffortexpected(costincurredtodatecomparedtototalestimatedcosts)OutputMeasuresResultstodatecomparedtototalresultsMeasuringProgressTowardCompletionCost-to-CostMethod

TotalcostsincurredtodatePercentcomplete=MostrecentestimateoftotalcostsoftheprojectMeasuringProgressTowardCompletionCost-to-CostMethodCurrentPeriodRevenue

TotalRevenuefromContract×PercentCompleteTotalRevenuetoRecognize-RevenueRecognizedinPriorPeriodsRevenueRecognizedinCurrentPeriodMeasuringProgressTowardCompletionA)Preparethejournalentriesfor2007,2008,and2009.

CasperConstructionCo.

Percentage-of-CompletionMethodIllustration:Percentage-of-CompletionMethodIllustration:Percentage-of-CompletionMethodIllustration:Percentage-of-CompletionMethodIllustration:Companiesrecognizerevenueandgrossprofitonlyatpointofsale—thatis,whenthecontractiscompleted.Underthismethod,companiesaccumulatecostsoflong-termcontractsinprocess,buttheymakenointerimchargesorcreditstoincomestatementaccountsforrevenues,costs,orgrossprofit.CompletedContractMethodCompletedContractMethodIllustration:Illustration:CompletedContractMethodLong-TermContractLossesTwoMethods:LossintheCurrentPeriodonaProfitableContractPercentage-of-completionmethodonly,theestimatedcostincreaserequiresacurrent-periodadjustmentofgrossprofitrecognizedinpriorperiods.LossonanUnprofitableContractUnderbothpercentage-of-completionandcompleted-contractmethods,thecompanymustrecognizeinthecurrentperiodtheentireexpectedcontractloss.Illustration:LossonProfitableContractLong-TermContractLossesb)Preparethejournalentriesfor2007,2008,and2009assumingtheestimatedcosttocompleteattheendof2008was$215,436insteadof$170,100.CasperConstructionCo.

Long-TermContractLossesIllustration:LossonProfitableContractLong-TermContractLossesIllustration:LossonProfitableContractIllustration:LossonUnprofitableContractLong-TermContractLossesc)Preparethejournalentriesfor2007,2008,and2009assumingtheestimatedcosttocompleteattheendof2008was$246,038insteadof$170,100.CasperConstructionCo.Long-TermContractLosses$683,438–675,000=8,438cumulativelossIllustration:LossonUnprofitableContractPlugLong-TermContractLossesIllustration:LossonUnprofitableContractLong-TermContractLossesIllustration:LossonUnprofitableContractFortheCompleted-Contractmethod,companieswouldrecognizethefollowingloss:Product-financingarrangements.

Salewithrightofreturn.

Collectibilityofrevenueishighlyuncertain.RevenueRecognition

AfterDeliveryAnagreementinwhichasponsoring

companysellsaproducttoanothercompanyandinarelatedtransactionagreestorepurchasetheproduct.Thesponsoringcompany--Recordsaliabilitywhentheproceedsarereceived.--Nosaleisrecordedandinventoryisnotadjusted.Waitforasaletooutsideparty.Product-FinancingArrangements

Insomeindustriesitiscommonpracticethatthesalestermsallowcustomerstherighttoreturngoodsunderspecifiedconditionsandoverlongperiodsoftime.BookPublishingEquipmentManufacturingRightofReturnRecognizerevenueatpointofsaleif,Sellingpriceisfixedordeterminable.Buyerisobligatedtopaythesellerandpaymentisnotcontingentuponresaleoftheproduct.Buyerisobligatedevenincaseoftheftorphysicaldestruction.Buyerhaseconomicsubstanceapartfromthatprovidedbytheseller.Sellerhasnoobligationforfutureperformance.Futurereturnscanbeestimated.RightofReturnWhenweareuncertainaboutthecollectibilityofthesalesrevenue,weshoulddeferrevenuerecognition.Twocommonlyusedaccountingmethodsarethe...Installmentsalesmethod.Costrecoverymethod.InstallmentSalesInstallmentSalesMethodSaleandcostofsalerecordedasusual.Computegrossmarginrateontheinstallmentsales.Recognizegrossmarginascashisreceived.Grossmarginnotrealizedisdeferreduntilafutureperiod.InstallmentSales

Sam’sAppliancesmadesalesof$200,000in2005thatqualifiedfortheinstallmentsalesmethodofaccounting.TheitemssoldhaveacosttoSam’sof$130,000.During2005,Sam’scollectedcashfrominstallmentcustomersof$90,000.Theremainingamountwillbecollectedin2006.Preparethejournalentriestorecordtheinstallmentsalestransactionsduring2005.InstallmentSales

ExampleInstallmentSales

ExampleInstallmentSales

ExampleInstallmentSales

ExampleInstallmentSales

ExampleInstallmentSales

ExampleInstallmentSales

ExampleCashcollectionin2005$90,000Grossmarginpercentage×35%Grossprofittorecognize$31,500InstallmentSales

ExampleBalanceSheetInstallmentSales

ExampleBalanceSheetInstallmentSales

ExampleLiketheinstallmentsalesmethod,costrecoveryisusedwhenweareuncertainaboutthecollectibilityofthesalesrevenue.Noprofitisrecognizeduntilcostofitemsoldisfullyrecovered.CostRecoveryMethod

Sam’sAppliancesmadesalesof$200,000in2005thatqualifiedforthecostrecoverymethodofaccounting.TheitemssoldhaveacosttoSam’sof$130,000.During2005,Sam’scollectedcashfrominstallmentcustomersof$90,000.Theremainingamountwillbecollectedin2006.Preparethejournalentriestorecordtheinstallmentsalestransactionsduring2005.CostRecoveryMethodExampleCostRecoveryMethodExampleCostRecoveryMethodExampleCostRecoveryMethodExampleNoprofitisrecognizedin2005becausethecostoftheitemsold($130,000)hasnotbeenrecoveredintheformofcashreceipts.Oncewecollect$130,000incash,profitrecognitionbegins.CostRecoveryMethodExampleAllgrossprofithasbeendeferreduntilwerecoverthe$130,000costoftheitemsold.BalanceSheetCostRecoveryMethodExampleCompletionofProduction

AccretionBasis

DiscoveryBasisRevenueRecognitionBeforeDeliverySpecificPerformanceMethod

ProportionalPerformanceMethod