Problem
CuttingEdge Construction Company was hired by High Impact School to add a new stadium to their school. The stadium includes a consession stand, new restrooms, new locker rooms, a parking lot and the stadium itself. The contract had 5 phases of construction with each phase being a performance obligation. The transaction price of the product is $2,675,000. As each phase involves a sperate part of the stadium, each phase is fully functional at the point of delivery.
|
Phase
|
Standalone Sales Value
|
|
Phase 1
|
300,000
|
|
Phase 2
|
760,000
|
|
Phase 3
|
560,000
|
|
Phase 4
|
440,000
|
|
Phase 5
|
940,000
|
|
|
3,000,000
|
The contract price is collected in advance from High Impact School. Phases 1 and 2 are completed in the current year with Phases 3 and 4 to be completed the following year. Phase 5 will be completed in the 3rd year of construction.
Task
Prepare a journal entry to record any revenue to be recognized during the current period.