A manufacturing firm receives a bid from a local construction company to build a warehouse for $300,000.

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A manufacturing firm receives a bid from a local construction company to build a warehouse for $300,000. The firm decides to build the warehouse itself and does so at a cost of $250,000. Why is it that GAAP do not permit the firm to record the warehouse at $300,000 and recognize revenue of $50,000? How will net income differ if the firm follows the generally accepted procedure versus recording the warehouse at $300,000?

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