Required:For each of the cases,

1.determine whether the seller should recognize revenue(a)over time or(b)when the product or service is completed.

2.Explain your answer using GAAP revenue recognition rules.

3.Explain how each wouldappear on the income statement and balance sheet.

Case 1:Your construction company entered into a fouryear contract to build a store for a fixed price of$8,000,000.You estimated your costs at6,500,000.At the end of the3rd year you estimated that you are75%complete and your estimate to completewill be8,500,000because of labor problems.What are the two alternative methods that can be used to record revenue on this project and what is the affect if:

1.You estimate a total loss on the project.

2.You believethat the estimated costs can be reducedand you will make an overall profit on the project.

Case2:Your company sells both new and used printers.Some of the printers are used by the company for6months and then sold as used printers.Should the used printers be sold as revenue or gain on sale?

Case3-Your company sells a product bundle that costs$100,000,This product includes software valued at$75,000and a2year service agreementwith a value of$25,000if sold separately. Your company installedthe software on July1,2016,and the client paid$50,000;thebalance is due on December31,2016.Identify the performance obligations and the revenue in2016,assuming

(a)the performance obligations are interdependent and

(b)the performance obligations are not interdependent