Explore BrainMass

Revenue Recognition

Please see full description of the problem in the attached file.

© BrainMass Inc. brainmass.com August 14, 2018, 5:59 pm ad1c9bdddf


Solution Preview

Judgments about whether revenue should be recognized are among the most contentious that an auditor faces. Following are a number of situations in which the auditor will be required to either acquire additional information or make decisions about the amount of revenue to be recognized.

a. Identify the primary criteria the auditor should use in determining revenue to be recognized.

Revenues are defined as inflows or other enhancements of assets of an entity or settlements of its liabilities during a period from delivering or producing goods, rendering services, or other activities hat constitute the entity's ongoing major or central operations.

From an accounting standpoint, revenue is considered to be realized when two criteria are satisfied: -
1. Objective evidence exists as to the amount of the revenue.
2. All necessary cost of generating the revenue have been incurred or can be
reasonably estimated.

In the application of these criteria, revenue is generally considered to be earned when goods are sold or services have bee performed and are billable.

b. For each of the scenarios:

? Identify the key issues to address in determining whether revenue should be recognized.
? Identify additional information the auditor may want to gather in making a decision on revenue recognition.
? Based only on the information presented, develop a rationale for either the recognition or nonrecognition of ...

Solution Summary

This solution is comprised of a detailed explanation to answer the request of the assignment in text file.