Jones sells computer software to Wyatt that requires significant construction. When recognizing revenue, Jones
A) allocates the associated discounts to all the customization efforts, including upgrades
B) can use percentage of completion to recognize revenue
C) can recognize revenue upon delivery of the software
D) must use the fair value of the software delivered in determining realizable revenue

Question

Quizplus · Accepted Answer

Since the software requires significant construction, percentage of completion method should be used to recognize revenue over time as construction progresses. This method matches revenue recognition with the costs incurred in the construction process while ensuring that revenue is recognized in the appropriate periods.

Jones Sells Computer Software to Wyatt That Requires Significant Construction