Contract Revenue Recognition Quiz

Contract revenue recognition

• On 1 July 20X5, AX, a construction company, entered into a two-year contract to build a property for a customer on the customer's land

• The contract specifies that control of the property is transferred to the customer as it is constructed

• At 30 June 20X6, the contract's details are as follows:

  • Contract price: $900,000
  • Costs to date: $600,000
  • Estimated costs to completion: $200,000
  • Progress payments invoiced and received: $500,000
  • Work certified: $540,000

• AX wishes to use an input method to assess progress towards complete satisfaction of its performance obligation

• How much revenue should AX recognise in relation to this contract for the year ended 30 June 20X6?

  • $675,000

Non-refundable upfront fee

• On 1 December 20X5, FC received a non-refundable upfront fee of $80,000 for services
• The services will be provided from February to March 20X6
• What is the correct accounting treatment for this fee in the year ended 31 December 20X5?
  • Recognise revenue of $80,000

Sale with return

• On 31 December 20X2, SL sold goods to customer for $100,000 on a sale or return basis
• Historically, 40% of goods sold to this customer have been returned
• How much revenue should SL recognise in relation to this sale for the year ended 31 December 20X2?
  • $60,000

Test your understanding of contract revenue recognition with this quiz focused on construction contracts. Analyze scenarios involving contract price, costs, and progress payments to determine appropriate revenue recognition. This quiz is ideal for accounting students and professionals dealing with construction contracts.