Intermediate accounting 1

Paragraph Question 2 Luke Doors Ltd manufactures custom-made doors for homes. The company deals directly with some individual customers, but mainly does business with contractors that are building tract housing under contract with a developer. The developer is a real property development company that is constructing a large number of houses in a single new development For tract housing, Luke bids on the contract according to specifications given by the developer. The costs of preparing the bid are not substantial, but they are not insignificant either. If Luke wins the contract, the company then sets up a production line in the factory to manufacture the doors according to specifications set out in the contract. As the doors are finished, they are stored in Luke's factory temporarily, until the contractor is ready to receive them. When they are delivered to the building site (usually in batches, not all together), the contractor is responsible for any damage or breakage that occurs. Also, the contractor is responsible for proper installation. The houses are built (and sold) in batches. The sales from one batch help the developer to finance the next batch. After each batch of houses is finished and has been standing empty through a few rain or snow storms, the developer inspects for any failure in design, construction, or installation. If all is satisfactory, the developer authorizes payment for that part of the development. Payment is made to the contractor, which then is responsible for paying Luke. In the unlikely event that the contractor does not pay Luke, Luke can establish a lien on the houses that requires the developer (or the new owners who have purchased the houses) to satisfy Luke's claim. Required Using ASPE, determine when revenue should be recognized and how costs and payments should be accounted for Note- this is not a cose resR9D36, you just need to opply ASPE revenue recognition criteria to the scenorio obove. O a