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Under the "cost-to-cost" method, the percentage of completion may be computed as Total costs incurred to date divided by the Estimated total costs to complete total costs incurred to date multiplied by the Estimated total costs to complete Total costs incurred to date multiplied by the Estimated total costs to complete Total costs incurred to date divided by the sum of Total costs incurred to date and Estimated costs to complete On Jan, 1,20x1
- Under the "cost-to-cost" method, the percentage of completion may be computed as
- Total costs incurred to date divided by the Estimated total costs to complete
- total costs incurred to date multiplied by the Estimated total costs to complete
- Total costs incurred to date multiplied by the Estimated total costs to complete
- Total costs incurred to date divided by the sum of Total costs incurred to date and Estimated costs to complete
- On Jan, 1,20x1. Knock Co. enters into a contract with a customer to transfer a license for a fixed fee of P100,000 payable as follows. 20% at contract inception and balance due in 4 equal annual installments starting Dec. 31, 20x1. The discount rate is 12%. At contract inception, Knock determines that there is significant uncertainty in the collectability of the note, and that the nature the promise to grant the license is to provide the customer with the right to use" Knock's intellectual property as it exists at grant date. Knock transfers the license to the customer, and incurs direct contract costs of P20,0000, on Jan. 1, 20x1. How much contract revenue are recognized in 20x1?
- 0
- 20,187
- 20,000
- 80,747
Expert Solution
Question 1 - Option A i.e Total cost incurred to date divided by Estimated Total cost to complete.
Question 2 - Option D i.e 80,747 as there is a contract between Knock Co. and the customer that 20% of the contract amount will be paid at the time of contract inspection and remaining in 4 equal installments therefore the Revenue should be recognised at a discouting rate of 12%. Therefore the Revenue should be recognised as follows :-
= ( 0.893 + 0.797 + 0.712 + 0.636) * (20000 * 4)
= 80747 approx.
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