Reference no: EM133173438

Question - Boreal Landscape Corp. (BLC) is a landscape design company located in North York, Ontario, that prepares its financial statements using ASPE and has a July 31 year end. BLC provides gardening supplies and products as well as full landscape design services for residential properties. BLC is currently working on a project that includes design and installation of landscaping for the Thompson family. The project began in May 2021. The Thompsons pay BLC on a monthly basis for the services and products provided, and have always been prompt with payments.

On July 31, 2021, BLC set aside 1,000 square feet of stone for the Thompson project in its warehouse. The total cost of the stone was approximately $5,000, and it was expected to be installed at the Thompson property sometime in August. BLC charges a markup of 50% to its customers on all stone purchases. The Thompsons agreed to this markup, as it is standard in the industry, but they wanted to see how the stone would look with their house before it was installed. If it was not to their satisfaction, they would continue to look for another stone. As of July 31, 2021, revenue and cost of sales relating to the stone for the Thompson project was included in BLC's income.

Required -

a) Evaluate the revenue recognition criteria and determine whether revenue for the stone inventory related to the Thompson project should be recognized in the financial statements as at July 31, 2021.

b) Explain the impact of the conclusion in part (a) on the financial statements, if any.