Question 1

Coastal Corp. enters into a contract to deliver 1,000 widgets over 12 months. The contract price is $50,000. At the end of Month 3, Coastal has delivered 300 widgets and incurred costs of $12,000. The estimated total costs to fulfill the contract are $40,000.

Using the output method, how much revenue should Coastal recognize through Month 3?

Accepted Answer

Under the output method, measure progress based on units delivered to the customer. Calculate the percentage of total units delivered and apply this percentage to the total contract price.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Using input method (costs incurred), using time-based progression, or applying wrong percentages to contract price

How to approach this question

Full Answer

Common mistakes

Practice the full CPA FAR Practice Exam 2

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