Posted: August 9th, 2016

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You are the Senior Accountant for the Patty Corporation which has several divisions. They each keep their own accounting books and have chosen the appropriate method of revenue recognition based on their operations.

Pat’s Electronics Division

Pat’s Electronics Division sells computers through agents in various cities. Agents send orders and down payments to our company. The division then ships the goods F.O.B. shipping point directly to the customers. Revenue is recognized at the point of sale.

Additional Financial Data:
Orders for fiscal year 2012 $ 3,000,000
Down Payments collected in 2012 $ 300,000
Billed and shipped in 2012 $ 2,400,000
Freight billed in 2012 $ 70,000
Commissions paid to Agents (after ship to customer) 10%
Warranty Returns as % of Sales 1%

Pickle Construction Division

The Pickle construction division was working on one project for the 2012 fiscal year. They use the percentage of completion revenue recognition method.

Contract for new administration building
Total Contract Amount $ 60,000,000
Contract Grant Date August 14, 2012
Construction Began September 1, 2012

Estimated Cost to Complete at beginning of contract $ 52,000,000
Estimated Time to Complete Project 2 years

As of Dec 31, 2012
Construction Costs incurred to date $ 14,140,000
Billings to date $ 19,500,000
Expected costs to complete $ 36,360,000

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