Question

An entity entered into a contract to construct a building. Based on the contract’s terms, the entity appropriately determined that the performance obligation in the contract will be satisfied over time. At an early stage of the contract, the entity cannot reasonably measure the outcome of the contract, but it expects to recover the costs incurred in the construction of the building. The revenue from the contract should be recognized __________.

Answer 1

Answer:

It should be recognized to the extent of cost implication

Explanation:

Contract is simply an agreement reached between two or more parties which must be strictly adhered to. If the entity above recognizes above the extent of cost implication, it would a violation or breach of contract. So, the revenue must be recognized to the extent at which cost was incurred.