Chapter 1
Recognition and Measurement
29
AP -10B (
5
)
Leonid Glebovski has agreed to pay $50 million for a custom-made yacht ordered from Dream
Yacht Ltd., a publicly traded corporation. The yacht was constructed over four years with the
following costs incurred by DreamYacht.
2016
$20,000,000
2017
$6,000,000
2018
$4,000,000
2019
$2,000,000
The project was completed on time and all amounts paid in full.
Calculate the revenue recognized by DreamYacht in each year using the percentage-of-
completion method.
Year
Actual Costs
Incurred
Percentage of
Completion
Revenue
Recognized
2016
2017
2018
2019
Analysis
Identify some drawbacks to the percentage-of-completion method to recognize revenue.
