5 Herald Corporation constructed a building at a cost of 100

5. Herald Corporation constructed a building at a cost of $100,000. A local contractor had submitted a bid to construct it for $90,000.

a. At what amount should the building be recorded?

b. Should revenue be recorded for the savings between the cost of $90,000 and the bid of $100,000?

Solution

a. The building should be recorded at its cost of $100,000.

b. No. The building should be recorded at its actual cost of construction which is $100,000. No revenue should be recorded as it is not actual revenue earned.