Willingham Construction is in the business of building high-priced, custom, single-family homes. The company, headquartered in...

Willingham Construction is in the business of building high-priced, custom, single-family homes. The company, headquartered in Anaheim, California, operates throughout the Southern California area. The construction period for the average home built by Willingham is six months, although some homes have taken as long as nine months.

You have just been hired by Willingham as the assistant controller and one of your first tasks is to evaluate the company’s revenue recognition policy. The company presently recognizes revenue upon completion for all of its projects and management is now considering whether revenue recognition over time is appropriate.

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Expert Solution

Revenue recognition policies describe that when a revenue should be recognised.
These policies states that revenue should only be recognised by the organisation whenever it become certain to receive such revenue.

In construction business such revenues can be recognised on the amount of completion of work or whenever the construction is approved.

In the given case :

Such revenues by the Willingham Construction can also be recognised before the completion for all of its projects.

Revenues can be recognised based on billing and approval of completion.
Revenues can be recognised in installments also.

Even though the company's present policy of recognition for revenues is also correct but still before the completion for all of its projects, the company can recognize the revenues in its financial statements.

ekkarill92 answered 1 year ago

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