Question

Bella Vista Company enters into a contract to build custom equipment for ABC Carpet Company. The contract specified a delivery date of March 1. The equipment was not delivered until March 31. The contract required full payment of $75,000 30 days after delivery. The revenue for this contract should be:

Answer 1

Answer:

recognized on March 31 after the delivery of the equipment

Explanation:

Revenue is recognized once the recognition criteria is met. These criteria includes;

• the cost of the item sold can be measured reliably
• the items has been delivered or the service has been rendered

Given that the contract specified a delivery date of March 1.

The equipment was not delivered until March 31 and as such, the revenue for the contract should be recognized on March 31 after the delivery of the equipment.