Part b
P18-1 (Comprehensive Three-Part Revenue Recognition) Van Hatten Industries has these de divisions--Depp Construction Division, DeMent Publishing Division, and Ankiel Securities Divisi Each division maintains its own accounting system and method of revenue recognition Depp Construction Division During the fiscal year ended November 30, 2014, Depp Construction Division had one construction project in process. A $30,000,000 contract for construction of a civic center was granted on June 19, 2014, and con- struction began on August 1, 2014. Estimated costs of completion at the contract date were $25,000,000 over a 2-year time period from the date of the contract. On November 30, 2014, construction costs of $7,200,000 had been incurred and progress billings of $9,500,000 had been made. The construction costs to complete the remainder of the project were reviewed on November 30, 2014, and were estimated to amount to only $16,800,000 because of an expected decline in raw materials costs. Revenue recognition is based upon a percentage-of-completion method. DeMent Publishing Division The DeMent Publishing Division sells large volumes of novels to a few book distributors, which in turn sem to several national chains of bookstores. DeMent allows distributors to return up to 30% of sales, and a tributors give the same terms to bookstores. While returns from individual titles fluctuate greatly returns from distributors have averaged 20% in each of the past 5 years. A total of $7,000,000 of paper novel sales were made to distributors during fiscal 2014. On November 30, 2014 (the end of the risca $1,500,000 of fiscal 2014 sales were still subject to return privileges over the next 6 months. There $5,500,000 of fiscal 2014 sales had actual returns of 21%. Sales from fiscal 2013 totaling $2,000,00 lected in fiscal 2014 less 18% returns. This division records revenue according to the method revenue recognition when the right of return exists. Ankiel Securities Division 2013 totaling $2,000,000 were col- to the method referred to as Ankiel Securities Division works through manufacturers' agents in various cities. Orders for and down payments are forwarded from agents, and the division ships the goods f.o.b. fact customers (usually police departments and security guard companies). Customers are bill the balance due plus actual shipping costs. The company received orders for $6,000,000 of god fiscal year ended November 30, 2014. Down payments of $600,000 were received, and $5,200 rders for alarm systems t.o.b. factory directly to Sare billed directly for 000 of goods during the d, and $5,200,000 of goods were billed and shipped. Actual freight costs of $100,000 were also billed. Commissions of 10% ice are paid to manufacturing agents after goods are shinned to customers. Such goods are wa ere also billed. Commissions of 10% on product 00 days after shupment, and warranty returns have been about 1% of sales. Revenue is recognized point of sale by this division. of sales. Revenue is recognized at the Instructions (a) There are a variety of methods of reven methods of revenue recognition, and indicate whether each is in accordance w As of revenue recognition. Define and describe each of the following accounting principles. ether each is in accordance with generally accepted (1) Point of sale. (2) Completion-of-production. (3) Percentage-of-completion. (4) Installment-sales. (b) Compute the revenue to be recognized in fiscal year 2014 for each of the three operating divisions of Van Hatten Industries in accordance with generally accepted accounting principles n1102 (Recnonition of Profiton Long Term Cout int
