The Five-Step Revenue Recognition Model

A.

Step 1: Identify the Contract(s) with a Customer

B.

Step 2: Identify the Performance Obligations in the Contract

C.

Step 3: Determine the Transaction Price

D.

Step 4: Allocate the Transaction Price to the Performance Obligations in

the Contract

E.

Step 5: Recognize Revenue When (or as) the Entity Satisfies a

Performance Obligation

F.

Practical Expedients in Applying the Model

G.

Applying the Model to Contract Modifications

C3-1 Applying the 5-step model (LO 3-1) On January 1, 2019, LeMoyne Construction Company signs a contract to build an office building for Franklin Corporation for $10 million. Franklin remits $1 million to LeMoyne upon signing the contract, $5 million when the foundation and all outside components are complete, and $4 million upon full completion. Franklin must pay LeMoyne an additional S100,000 if all construction is completed by July 31, 2020. Required: Apply the 5-step revenue recognition model to determine when revenue should be recognized by LeMoyne