Exercises Assessing Revenue Recognition Timing Explain when each of the followin

Question

Exercises Assessing Revenue Recognition Timing Explain when each of the following businesses fulfills the performance obligations implicit in the sales contract. LO1 American Eagle Outfitters Inc. (AEO) Boeing Co.(BA) a. A clothing retailer like American Eagle Outfitters Inc. b. A contractor like Boeing 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 Supervalu Inc. (SVU) to buyers f A banking institution like Bank of America Corp, that lends money for home mortgages 8. A manufacturer like Harley-Davidson Inc. h. A publisher of magazines such as Time-Warner Inc. Bank of America Corp. (BAC) Harley-Davidson Inc. HOG) Time-Warner Inc.

Explanation / Answer

Revenue Recognition timing- It is a recognition of a revenue ,when it is earned

a.A clothing retailer like America Eagle outfitters INC- at the time of sales

( After selling clothes to the customer ,they receives the revenue)

b.A Contractor like Boeing company - As it is contract work ,revenue recognize at different levels like contractor recognize based on percentage of work completed .The whole revenue is recognized only after the completion of full project/contract.

(At the end contract ,will have clear picture about total expenditure spent on a project)

c.A grocery store like supervalu INc- at the time of sales

d. Mtv - At the time of selling licenses ( it might include Flim or music license)

e.Real estate - After transfering ownership of the property to buyer (risk and rewards)

f.Bank -at the end of completion of obligation of making the payment. (at the final settlement of loan)

g.A manufacturer - at the time of FOB or if it purchased under EMI then it is end of the last EMI payment .(risk and rewards to be transfer to buyer)

h.Magazines - At the time of sales of the Magazine and at the time of subcribtion.

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