#1-A

A construction company entered into a fixed-price contract to build an office building for $40 million. Construction costs incurred during the first year were $14 million and estimated costs to complete at the end of the year were $21 million. The building was completed during the second year. Construction costs incurred during the second year were $22 million. How much revenue and gross profit or loss will the company recognize in the first and second year if it recognizes revenue upon contract completion?

1-B

Franklin Construction entered into a fixed-price contract to build a freeway-connecting ramp for $46 million. Construction costs incurred in the first year were $36 million and estimated remaining costs to complete at the end of the year were $23 million. How much gross profit or loss will Franklin recognize in the first year if it recognizes revenue over time according to percentage of completion method?

How much gross profit or loss will Franklin recognize in the first year applying the completed contract method?

1-C

Access the FASBs Accounting Standards Codification at the FASB website (www.fasb.org)

Required:

Determine the specific nine-digit Codification citation (XXX-XX-XX-XX) for accounting for each of the following items:

1. What are the five key steps to applying the revenue recognition principle?

2. What are indicators that control has passed from the seller to the buyer, such that it is appropriate to recognize revenue at a point in time?

3. Under what circumstances can sellers recognize revenue over time?