contract revenue

*measured @ fv
*includes the initial amount or revenue agree in the contract
*may increase or decrease from one perio to the next.
*change the scope of work
*cost escalation clause (increase)
*result of penalties from dalays (decrease)
*#of units increase
* earlier completion
contract costs
*labor cost
*materials
*depreciation of ppe
*cost of moving ppe
*etc

Types of contract cost

1. cost incurred to date
*precontract cost and costs incurre after contract acceptance
criteria:
1. capable of being identified separately
2. can be measured reliably
3. probable that the contract will be obtained
*cost incurred after acceptance
*capitalized in the Costruction in progress (CIP)

2. Estimated cost to complete

*anticipate cost of materials, labor, subcontracting cost, and indirect costs require to complete the project at a scheduled time
*similar to accounting inventory
he project at a scheduled time.
 1000000
200000 333333.3 -600000
400000 200000 400000
600000 133333.3 0.333333
0.333333 133333.3

9000000 9000000
7800000 6300000
1200000 2700000
0.5 0.777778
A 600000 2100000
-600000
1500000
 6000000
4800000
1200000
0.75
900000
-600000
300000 A

3000000
3100000
-100000

900000 2880000 -1980000 B

3600000 1920000
4500000 4800000
0.2 0.6
 900000 1000000 900000
1800000 900000 900000
2700000 100000 0A
0.333333

840000 3360000 4200000

600000 3150000 600000 3150000 3750000
2400000 240000 210000 450000
3000000 3150000
0.2 1
 -20000
180000
160000
100%
160000
2000000
1840000
820000
1020000
360000
660000
500000
20000
520000
-10000
510000
 0

2000000
1000000
3000000
0.9
2700000

800000
582000
218000

1200000
-218000
982000
 cash
deferred revenue

deferred cost of revenue

franchise expense
cash

cost of revenue
deferre cost of revenue

deferred revenue
revenue from IFF

case 2 1m cash-signed
balance 5 annual installment
12%

Accrual method cash 1,000,000

notes receivable 9,000,000
dererred revenue 10,000,000

deferred cost of revenue 2,000,000

franchise expense 50,000
cash 2,050,000

cash 2,880,000
notes receivable 1,800,000
Interest income 1,080,000

adjusting entries
cost of revenue 2,000,000
deferred cost of revenue 2,000,000

dererred revenue 10,000,000

revenue 10,000,000

revenue from franchise fee 10,000,000

cost of franchise 2,000,000
Gross profit 8,000,000
expenses 50,000
Operating income 7,950,000
Interest Income 1,080,000
Net Income 9,030,000
cash 1,000,000
notes receivable 9,000,000
dererred revenue 10,000,000

deferred cost of revenue 2,000,000

franchise expense 50,000
cash 2,050,000

cash 2,880,000
notes receivable 1,800,000
Interest income 1,080,000

adjusting entries
cost of revenue 2,000,000
deferred cost of revenue 2,000,000

dererred revenue 10,000,000

cost of revenue 2,000,000
deferred gross profit 8,000,000

deferred gross profit 2,240,000

realized gross profit 2,240,000

DP 1,000,000
first installment 1,800,000 2,800,000
GPR 80%
Realized GP 2,240,000

revenue from franchise fee 10,000,000

cost of franchise 2,000,000
deferred Gross profit 8,000,000
less: deferre gross profit, en 5,760,000
Realized Gross profit 2,240,000
expenses 50,000
Operating income 2,190,000
Interest Income 1,080,000
Net Income 3,270,000
A

80000
50000
8000
-40000
98000
 35000
147000
135000
18500 116500
30500
13500 17000
52000 A

6000 6000
86000 98000
74000 82000
166000 186000