Part 2

  1. Discuss the revenue principle and the matching principle as per the generally accepted accounting principles (GAAP).
  2. Contrast the percentage-of-completion method of revenue recognition versus the completed contract method.
  3. Solve this accounting problem for the ABC grocery company relating to revenue and expense recognition as per GAAP: ABC Corporation uses the percentage-of-completion method of accounting. In 2010, ABC entered into a contract for a contract price of $2,000,000.
     

    2010

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    Costs incurred during the year

    600,000

    Estimated costs to complete as of Dec 31

    900,000

    Billings during the year

    400,000

    Collections during the year

    300,000

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