Will you read and edit my final product? Let me know if I got anything wrong….what I highlighted in red I am particularly concerned about. I know it’s not the best, but I’m going for good enough. An

Will you read and edit my final product? Let me know if I got anything wrong….what I highlighted in red I am particularly concerned about. I know it’s not the best, but I’m going for good enough. An A would be spectacular but it’s my first one and I’m definitely not very good at this yet!

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Running head: BO BROKER COMPANY TREATMENT OF REVENUES
1
Bo Broker Company Treatment of Revenues
Kana Ng
A&M CT

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BO BROKER COMPANY TREATMENT OF REVENUES
2
Bo Broker Company Treatment of Revenues
The Issue
Bo Broker Company charges a fee for bringing together the Acme Construction Company
and the First Bank Company. The parties agree that Bo earns her fee when Acme and First
“agree” to the terms of the construction mortgage. Bo Broker Company has facilitated a
transaction between the two entities for which Bo Broker Company will receive compensation
with a choice of four different types of payment instrument and is seeking advice from the
accountant on the treatment of those payment instruments.
The payment options are as follows:
1.
a non-interest bearing, unsecured “negotiable” note in payment of the fees earned,
which is payable over the time period of the related construction mortgage
2.
a non-negotiable note payable over the same time period
3.
a commitment letter, not contingent upon the “future event” of the borrower receiving
certain construction draws
4.
a commitment letter, where the fees would be paid only if the borrower actually
receives the draws for the construction from the lender
When should revenue be recognized by the client?
The Evidence
FASB Statement of Financial Accounting Concepts No. 5, Recognition and Measurement in
Financial Statements of Business Enterprises, explains the recognition considerations for
revenues and gains. During a specified period revenues are determined to be recognizable after
they have met two considerations; being earned and being realized or realizable. To be
recognized as earned, the entity has to deliver the required goods, service or contracted demands.
To be realized or realizable, the form of payment has to have a certain level of liquidity and
value.

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