Question
Company B enters into a contract to manufacture equipment for a customer. The equipment is manufactured at Company Bs plant and is under Company Bs
Company B enters into a contract to manufacture equipment for a customer. The equipment is manufactured at Company Bs plant and is under Company Bs control while it is being built. The customer makes a 20% deposit at the inception of the contract. Periodic payments from the customer over the life of the contract equal an additional 30% of the contract price. The remaining 50% of the contract price is due upon delivery of the equipment. Company B expects the customer to make all required payments. If the customer terminates the contract, Company B is entitled to keep all amounts received but has no claim for further payments.
How should Company B recognize revenue on this contract? What is the justification for your answer?
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