Question

Wigilia Wire, Inc. wrote a contract for a $113,000 sale to the new Fuse Electric Company. Wigilia only anticipates a slightly greater than fifty percent chance that Fuse Electric will be able to pay the amounts that Wigilia is entitled to receive under the contract. Upon delivery of the wires, assuming no payment has yet been made by Fuse Electric.

How much revenue should Wigilia recognize under U.S. GAAP?

Answer 1

"Revenue recognition principle states that revenue should be recognised and recorded when it is realized or realizable and when it is earned"

We can say that revenue should be recorded when the organisation earned revenue that doesn't mean that revenue should be collected.As per accrual accounting concept revenue can be recognised without actually being received.

In this case wigilia should recognise the whole amount. Sale is realisable at $113,000 since wigilia delivered wires and earned revenue even though actually not received the payment as per USGAAP.

I hope this will help you.