Question

For each of the following independent items, indicate when revenue should be recognized

h. Selling undeveloped lots for future retirement homes in a western province, with very low down payment and long-term payment contracts.

i. Sale of a two-year parking permit by a parking garage, with one-half the sale price received at the time of the sale, and the remainder to be received in equal monthly payments over the period of the permit.

j. A fixed-price contract with the government to design and build a prototype of a space arm; the costs to complete the project cannot be reliably estimated. The government owns the arm throughout the contract.

k. A silver-mining company produces one million ounces of silver but stores the silver in a vault and waits for silver prices to increase.

Answer 1

h.Selling undeveloped lots for future retirement homes in a western province, with very low down payment and long-term payment contracts... Answer) After sales contract completion and agreement of both parties we can recognized the revenue for downpayment amount because after sale dead the buyer get full right to keep or sell the property and after each month completion we can recognized monthly instalement amounts.

i. Sale of a two-year parking permit by a parking garage, with one-half the sale price received at the time of the sale, and the remainder to be received in equal monthly payments over the period of the permit. Answer) in this the parking is for two year and we can recognized revenue on proportionate basis (monthly basis or Daily basis) irrespective of payment received for first half year because the services is utilized only once the day is passed.

j. A fixed-price contract with the government to design and build a prototype of a space arm; the costs to complete the project cannot be reliably estimated. The government owns the arm throughout the contract.. Answer) Revenue can be recognized on proportionate basis as acts are performed.

k. A silver-mining company produces one million ounces of silver but stores the silver in a vault and waits for silver prices to increase. - Answer) we cant recognized revenue unless and untill we sell the ounces of silver because the risk and owner transfer is basic of revenue recognization concept.