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High-tech contracts require explicit computation of the percentage of completion and the amount of revenue expected to be accrued in the project. The company can use the efforts-expended method cost-to-cost method. The cost-to-cost will evaluate the total project’s costs up to completion, based on the current costs already incurred. On the other hand, the efforts-expended method compares the proportion of efforts-expended and compares them to the expected efforts-expended at the end of the project Aicpa. (2016).
The revenue accrued=total estimated revenue* percentage complete.
In 2017, the XM, Ltd will credit the Accounts receivable and debit the loss account recorded in the previous year 2016. Also, any capitalized costs will be removed from the asset account. Doing so will violate the accountants’ standards of ethics resulting from misrepresentation of facts.
When a company is being sold the seller has the right to hide some unfavorable facts to a buyer if they so wish and the company can only disclose the information that the prospective buyer makes inquiries. The company enjoys wide latitude in deciding what information could be made available for the buyer. However, the seller can consider full disclosure of positive features which will and at some instances, the defects for insurance purposes.
Aicpa. (2016). Auditing and Accounting Guide: Investment Companies, 2016. John Wiley & Sons Inc.
Thank you for your response to this week's question! I appreciate youincluding your research to the AICPA, and I know this can be a confusingtopic. Can you put your research and your post in layman's terms, as if youwere explaining it to another classmate or me face to face?