Revenue Recognition is tied to delivery of the product from the seller to the buyer.

1- Production (percentage of completion & cost recovery method) (revenue recognition prior to delivery)

2- Point of delivery & completed contract method (revenue recognition at delivery) once I deliver the service for customer I recorded as revenue

3- Cash collection (defer revenue recognition until cash is collected) (revenue recognition after delivery) Recognizing revenue when goods and
services are delivered (in situation that we are not sure the customer will pay)

- Under IFRS, when there is significant uncertainty regarding collectability, revenue and expense recognition should be delayed until the
recognition criteria can be satisfied.

- Under U.S. GAAP, when there is exceptional uncertainty:

• Installment Sales Method or Deferred Gross Profit Method
• Profit Deferral Method or Cost recovery Method (after covering my cost I recognize profit)

THERE IS TWO TYPERS OF QUESTIONS

1. CERTINITY --> POINT OF DELIVERY --> AT DELIVERY

2. UNCERTINITY --> IFRS --> AFTER DELIVEY

Question1: On November 1, 2013, the Belmont Corporation, a real estate developer, sold a tract of land for $800,000. The sales agreement requires
the customer to make four equal annual payments of $200,000 plus interest on each November 1, beginning November 1, 2013. The land cost
$560,000 to develop. The company’s financial year ends on December 31.
Installment Sales (reasonable assurance of collectability)

-> BECAUSE THEY MINTION “assurance of collectability” --> WE USE --> (POINT OF DELIVERY) = AT DELIVERY --> (WE ARE
SURE THAT WE WILL GENERATE CASH IN FUTURE)

Answer:
Make Installment Sales:
November 1, 2013
Installment receivable 800,000
Installment sales 800,000
To record installment sales.

Cost of installment sales 560,000

Inventory 560,000
To record the cost of installment sales.

Collect Cash:
November 1, 2013, 2014, 2015, and 2016
Cash 200,000
Installment receivable 200,000
To record cash collection from installment sales.

Question 2: HOWEVER, IF THEY MINTION THAT --> IFRS Method for Significant UNCERTAINTY IN COLLECTABILITY -->
WE USE --> (CASH COLLECTION) = AFTER DELIVERY (WHEN WE ARE NOT SURE OF GENERATING CASH)

WE WILL GOING TO WRITE THE WHOLE YEARS BECAUSE WE ARE NOT RECOGNIZING UNTILL RECIVING

Answer:
Make Installment Sales and Collect Cash:
November 1, 2013, 2014, 2015, and 2016
Cash 200,000
Installment sales 200,000
To record installment sales.

November 1, 2013
Cost of installment sales 560,000
Inventory 560,000
To record the cost of installment sales.
 Installment Sales Method Method (Deferred Gross Profit Method)

Recognizes revenue and costs only when cash payments are received = gross profit percentage
Two components of the payment include:
1) a partial recovery of the cost of the item sold
2) a gross profit component

Gross profit percentage = Gross profit / Sales

Gross profit = Sales – COGS / Sales
Sales = COGS + Gross profit
Cost % = Cost / Sales
Cost% + Gross% = 100%

Question 3: On November 1, 2016, the Belmont Corporation, a real estate developer, sold a tract of land for $800,000. The sales agreement requires
the customer to make four equal annual payments of $200,000 plus interest on each November 1, beginning November 1, 2016. The land cost
$560,000 to develop. The company’s fiscal year ends on December 31.

Answer:

Gross profit recognized = gross profit percentage X period cash collection

 Cost Recovery Method (Profit Deferral Method )

Question 4: On November 1, 2016, the Belmont Corporation, a real estate developer, sold a tract of land for $800,000. The sales agreement requires
the customer to make four equal annual payments of $200,000 plus interest on each November 1, beginning November 1, 2016. The land cost
$560,000 to develop. The company’s fiscal year ends on December 31.

Answer:

IMPORTANT to mention that (no entry for gross profit)

FULL ANSWER
Consignment Sales --> when a company arranges for another company to sell its product under consignment.
(Because the consignor retains the risks and rewards of ownership of the product and title does not pass to the consignee, the consignor does not
record a sale until the consignee sells the goods and title passes to the eventual customer.)

Revenue Recognition Prior to Delivery

Long-term Contracts:
- Percentage-of-Completion Method
- Completed Contract Method (under U.S. GAAP)
- Cost Recovery Method (under IFRS)

Percentage-of-Completion Method Allocation of Gross Profit

Question 5: At the beginning of 2013, the Harding Construction Company received a contract to build an office building for $5 million. The project
is estimated to take three years to complete. According to the contract, Harding will bill the buyer in installments over the construction period
according to a prearranged schedule. Information related to the contract is as follows:

Under the percentage-of-completion, cost recovery, and completed contract methods, all costs of construction are recorded in an asset account called
--> ((construction in progress))
Answer:

Percentage-of-Completion, Cost Recovery, and Completed Contract Methods Compared

Gross profit recognized in each period = (total estimated gross profit X percentage completed to date) - gross profit recognized in prior periods