Analyze your answer using gaap revenue recognition rules

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Assignment

Your construction company entered into a four year contract to build a store for a fixed price of $8,000,000. You estimated your costs at 6,500,000. At the end of the 3rd year you estimated that you are 75% complete and your estimate to complete will be 8,500,000 because of labor problems. What are the two alternative methods that can be used to record revenue on this project and what is the affect if:

1. You estimate a total loss on the project.

2. You believe that the estimated costs can be reduced and you will make an overall profit on the project

For each of the cases,

1. Determine whether the seller should recognize revenue (a) over time or (b) when the product or service is completed.

2. Explain your answer using GAAP revenue recognition rules.

Reference no: EM131794368

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