SOLUTION: New Revenue Standard Case Study

View attached explanation and answer. Let me know if you have any questions.

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Question 1
According to the new revenue standard, it is defined as follows: “costs incurred by a firm in the
process of gaining a contract with an end customer that the business would not have incurred had
it not been successful in obtaining the contract.” When a company pays sales commissions to its
employees, this is the most common example of an additional cost connected with obtaining a
contract; however, there are other examples as well.
It is possible for inflatables to record the extra cost as an asset if they are able to recoup the
expenditures that will be incurred throughout the contract while still making a profit. There is an
added cost in this example since the contract says that if EZ Inflatables wishes to engage into a
contract…