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Intermediate Accounting Homework Week 1 Essay

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Below is an essay on "Intermediate Accounting Homework Week 1" from Anti Essays, your source for research papers, essays, and term paper examples.

Problem 1: a) The point of sale method recognizes revenue once the sales process is complete, meaning that the seller and buyers exchange goods, services, etc. This could be the date when the goods
were shipped, delivered, title ownership was transferred, etc. The point of sale method is in accordance with GAAP and follows the accrual method.

The completed-contract method recognizes revenues and gross profit only when the contract is completed. Under this method companies accumulate the costs of long-term contracts in process. No adjustments are made to income statements accounts for revenue, cost or gross profit until the contract or project is complete. This method should be used only in rear circumstances when it is impossible to detertmine the amount of work completed to date. This would be acceptable under GAAP only in those rear circumstances. The disadvantage of this method is that for long term projects the partial ocmpletion is not recognized and earnings are distorted.
No adjustments are made to income statements accounts for revenue, cost or gross profit until teh contract or project is complete. This method should be used only in rear circumstances when
it is impossible to detertmine the amount of work completed to date. This would be acceptable under GAAP only in those rear circumstances. The disadvantage of this method is that for long term projects the partial completion is not recognized and earnings are distorted.
long term projects the partial completion is not recognized and earnings are distorted.

The percentage-of-completion method is used on contracts extending for a long period of time, usually construction. In order to apply this method the following conditions must be met:
*   Reasonably accurate estimate of the costs
* High probability of collection of the payment
* Ability to...

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