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    Estimating sales

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    Company X is a software company that currently recognizes revenue when the agreement/contract is signed. Company X is considering a more conservative approach by recognizing revenue at the deliver of the product to customer. Therefore, it's considering changing its revenue recognition policy.

    Days in receivable under current recognition policy (contract): 160
    Days in receivable under new recognition policy (deliver): 120

    Note: It is the intent of the problem to use both license and service revenue for calculating the adjusted sales in #1.

    Estimate Company X's 1990 sales if revenue is recognized at delivery rather than when the contract is signed. Hint: use the estimate provided by the controller of the effect of recognizing revenue at delivery on days receivable.

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    Solution Preview

    The sales in 1990 are $970,844.
    Currently the revenue is accounted for on contract. Under the new policy the revenue would be accounted for on ...

    Solution Summary

    The solution explains how to estimate sales given the receivables