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.

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 :

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.
Also, the company presently recognizes revenue upon completion for all of its projects.

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 2 years ago

Problem 1 The manager of a construction company must decide whether to build single family homes,...

Problem 1 The manager of a construction company must decide whether to build single family homes, apartments, or condominiums. Profits (in thousands of dollars) are given in the following table and depend on various possible population trends. The probability of a declining population is 0.3, the probability for a stable population is 0.5 and the probability of a growing population is 0.2 Payoff table (in thousands of dollars): Population Declining Stable Growing Single Family Homes 220 80 75 Apartments 85...

Hide-IT (HI), a family owned business based in Tombstone, AZ, builds custom homes with special features,...

Hide-IT (HI), a family owned business based in Tombstone, AZ, builds custom homes with special features, such as hidden rooms and hidden wall safes. HI has been an audit client for three years. You are about to sign off on a “clean” opinion on HI’s current AFS when Art Hyde, VP Finance, calls to tell you that the AZ DRS has seized control of a HI bank account that includes about $450,000 of company funds; the account is NOT currently...

Building a single-family, partially custom-designed home as required by Mrs. and Mr. John Thomas on Strath...

Building a single-family, partially custom-designed home as required by Mrs. and Mr. John Thomas on Strath Dr., Alpharetta, Georgia. The single-family home will have the following features: 3,200 square-feet home with 4 bedrooms and 2.5 bathrooms Flooring hard wood in the first floor, tiles in the kitchen and bathrooms, carpet in bedrooms Granite kitchen countertops, GE appliances in the kitchen 3-car garage and external landscaping Ceiling 10 infirst floor and vaulted 9 ceilingsin bedroom. Homes is requesting that you complete...

Atlantic Glass Company makes custom, luxury shower door glass enclosures for new construction homes and bathroom...

Atlantic Glass Company makes custom, luxury shower door glass enclosures for new construction homes and bathroom remodeling projects. Recently they have received a significant number of inquiries from home builders and contractors about a new glass door design that includes both glass and iron in the shower enclosure materials. Atlantic Glass’s current production facilities do not have the machinery or space to produce such a specialty, multi material enclosure so the company has turned down these potential orders. The sales...

The data is the square footage and selling price of single-family homes for the month of...

The data is the square footage and selling price of single-family homes for the month of February and the first week of March. Square Footage Selling Price 1746 129320 1764 97000 676 35000 2788 400000 1944 68000 1960 117000 1056 148400 1564 35000 1100 165000 1120 114480 4080 175000 1442 65000 1937 60000 1900 18000 1150 258000 1650 134800 1953 30000 2424 69100 512 63000 1540 82500 1200 50000 1316 37500 1840 69000 3500 270000 5000 485000 1564 27000 1018...

Sally’s Swing Company produces and sells a single high-priced swing and in fiscal year 20XX the...

Sally’s Swing Company produces and sells a single high-priced swing and in fiscal year 20XX the company produced and sold 30,000 units. Sally’s Swing Company Income Statement For Fiscal Year 20XX Sales $1,800,000 Variable Costs $1,350,000 Contribution Margin 450,000 Fixed Costs $240,000 Income Before Taxes 210,000 Tax Expenses 63,000 Income After Taxes 147,000 *Total sales and production is 30,000 units 1. Calculate the per unit figures for each item from the Income Statement. 2. Compute the breakeven point in units...

Sweet Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and...

Sweet Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31, 2020. Jim Alcide, controller for Sweet, has gathered the following data concerning inventory. At May 31, 2020, the balance in Sweet’s Raw Materials Inventory account was $485,520, and Allowance to Reduce Inventory to NRV had a credit balance of $27,670. Alcide summarized the...

Whispering Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and...

Whispering Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31, 2020. Jim Alcide, controller for Whispering, has gathered the following data concerning inventory. At May 31, 2020, the balance in Whispering’s Raw Materials Inventory account was $424,320, and Allowance to Reduce Inventory to NRV had a credit balance of $27,440. Alcide summarized the...

Pharoah Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and...

Pharoah Home Improvement Company installs replacement siding, windows, and louvered glass doors for single-family homes and condominium complexes. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31, 2020. Jim Alcide, controller for Pharoah, has gathered the following data concerning inventory. At May 31, 2020, the balance in Pharoah’s Raw Materials Inventory account was $456,960, and Allowance to Reduce Inventory to Market had a credit balance of $28,300. Alcide summarized the...

ABC inc builds and sells single-family homes. the company had the following transactions during q1 2016...

ABC inc builds and sells single-family homes. the company had the following transactions during q1 2016 period that ended on march 31, 2016: 1. purchased a single-family home on january 10, 2016 which it plans to renovate and resell. the home was purchased for $200,000 with $150,000 paid in cash and the remainder to be paid upon sale of the property. 2. Purchased $10,000 worth of building materials at home depot used in the renovation. The purchased was paid in...

Question