A new shopping complex is being constructed at a cost of $1million. Projected cost are outlined belo. under the contract the client is required to pay a total of $1.2million in three equla installments.
year 1 cost billings
1 450,000 450,000
2 350,000 400,000
3 200,000 400,000
the owner of the shopping complex intends to rent shops to tenants for a monthly fee.this will be payable in two half yearly installments, one in january and the other in july.
required:
a)calcualte the amount of revenue that the construction company should recognised each year
b)prepare all journal entries for the 3rd year of the contract
c)the owner of the shopping complex has asked you to write a policy on revenue recognition . your policy should be about 200 words long and explain when to rcognise the following types of revenue
i)sale of goods on cash
ii)sale of goods under hire purchase aggreements
iii)dividends
iv) interest
vi) rents from tenants