E182.
(Revenue RecognitionPoint of Sale)
ShawCompanysellsgoodsthatcost$300,000toRicardCompanyfor$410,000onJanuary2,
[Link],whichisvaluedat$40,[Link]
thegoodsis$370,000.Theinstallationisexpectedtotake6months.
Instructions
(a)Preparethejournalentry(ifany)torecordthesaleonJanuary2,2014.
(b)Shawpreparesanincomestatementforthefirstquarterof2014,endingonMarch31,
[Link]?
E184.(Revenue RecognitionPoint of Sale)
WoodModeCompanyisinvolvedinthedesign,manufacture,andinstallationofvarious
[Link]
largecontractforStadiumInc.,whichconsistedofbuilding35differenttypesofconcession
[Link]
completionofthecounters,Stadiumwouldpay$2,000,[Link],duetothe
depressedeconomy,[Link]
thereforeaskedWoodModetoholdthecountersatitsmanufacturingplantuntilthearenais
[Link]
[Link]
[Link]
progresspaymentsforthearenaduetothedelay,Stadiumhasprovidedadepositof$300,000.
Instructions
(a)Explainthistypeofrevenuerecognitiontransaction.
(b)Whatfactorsshouldbeconsideredindeterminingwhentorecognizerevenueinthis
transaction?
(c)Preparethejournalentry(ies)thatWoodModeshouldmake,assumingitsignedavalid
salescontracttosellthecountersandreceivedatthetimeofsalethe$300,000payment.
E185.(Right of Return)
OrganicGrowthCompanyispresentlytestinganumberofnewagriculturalseedsthatithas
[Link],ithasdecidedtogranttofiveofitslargestcustomers
[Link]
[Link]$1,500,000onJanuary
2,2014.CompaniesarerequiredtopaythefullamountduebyMarch15,2014.
Instructions
(a)PreparethejournalentryforOrganicGrowthatJanuary2,2014,assumingOrganic
Growthestimatesreturnsof20%basedonpriorexperience.(Ignorecostofgoodssold.)
(b)AssumethatonecustomerreturnstheseedsonMarch1,2014,duetounsatisfactory
[Link],assumingthiscustomer
purchased$100,000ofseedsfromOrganicGrowth.
(c)Brieflydescribetheaccountingforthesesales,ifOrganicGrowthisunabletoreliably
estimatereturns.
E188.(Revenue Recognition on Marina Sales with Discounts)
TaylorMarinahas300availableslipsthatrentfor$[Link]
infullatthestartoftheboatingseason,April1,[Link]
reservedifpaidforbyDecember31,[Link],ifpaymentismadeby
December31,2014,a5%discountisallowed.TheboatingseasonendsOctober31,andthe
[Link],themarina
operatorisalsoofferinga20%discounttosliprenterswhopayforthe2016season.
ForthefiscalyearendedDecember31,2014,[Link]
hundredslipswerereservedandpaidforthe2015boatingseason,and60slipsforthe2016
boatingseasonwerereservedandpaidfor.
Instructions
(a)Preparetheappropriatejournalentriesforfiscal2014.
(b)[Link]
significanceoftheaccountingabovetothisperson.
E189.(Consignment Computations)
OnMay3,2014,EislerCompanyconsigned80freezers,costing$500each,toRemmers
[Link]$840andwaspaidbyEisler
Company.OnDecember30,2014,areportwasreceivedfromtheconsignee,indicatingthat
40freezershadbeensoldfor$[Link]
amountdue,afterdeductingacommissionof6%,advertisingof$200,andtotalinstallation
costsof$320onthefreezerssold.
Instructions
(a)Computetheinventoryvalueoftheunitsunsoldinthehandsoftheconsignee.
(b)Computetheprofitfortheconsignorfortheunitssold.
(c)Computetheamountofcashthatwillberemittedbytheconsignee.
E1810.(Multiple-Deliverable Arrangement)
[Link]
[Link]
[Link]
[Link],ApplianceCenterdoesnotofferinstallationor
[Link]
asfollows.
Ovenonly
$800
Ovenwithinstallationservice
850
Ovenwithmaintenanceservices
975
Ovenwithinstallationandmaintenanceservices
1,000
Ineachinstanceinwhichmaintenanceservicesareprovided,themaintenanceserviceis
separatelypricedwithinthearrangementat$[Link],theincrementalamount
chargedbyApplianceCenterforinstallationapproximatestheamountchargedby
[Link]
purchasesanovenwithinstallationand/ormaintenanceservices,intheeventAppliance
Centerdoesnotcompletetheservicesatisfactorily,thecustomerisonlyentitledtoarefund
oftheportionofthefeethatexceeds$800.
Instructions
(a)Assumethatacustomerpurchasesanovenwithbothinstallationandmaintenance
servicesfor$1,[Link],ApplianceCenterbelievesthatitis
probablethattheinstallationoftheequipmentwillbeperformedsatisfactorilytothe
[Link]
theconditionsforamultipledeliverablearrangementexistinthissituation.
(b)Indicatetheamountofrevenuesthatshouldbeallocatedtotheoven,theinstallation,and
tothemaintenancecontract.
E1812.(Recognition of Profit on Long-Term Contracts)
During2014,NilsenCompanystartedaconstructionjobwithacontractpriceof$1,600,000.
[Link].
2014
2015
2016
Costsincurredtodate
$400,000
$825,000
$1,070,000
Estimatedcoststocomplete
600,000
275,000
0
Billingstodate
300,000
900,000
1,600,000
Collectionstodate
270,000
810,000
1,425,000
Instructions
(a)Computetheamountofgrossprofittoberecognizedeachyear,assumingthe
percentageofcompletionmethodisused.
(b)Prepareallnecessaryjournalentriesfor2015.
(c)Computetheamountofgrossprofittoberecognizedeachyear,assumingthecompleted
contractmethodisused.
E1819.(Installment-Sales Method Calculations, Entries)
CoffinCorporationappropriatelyusestheinstallmentsalesmethodofaccountingto
recognizeincomeinitsfinancialstatements.Thefollowinginformationisavailablefor2014
and2015.
2014
2015
Installmentsales
$900,000
$1,000,000
Costofinstallmentsales
594,000
680,000
Cashcollectionson2014sales
370,000
350,000
Cashcollectionson2015sales
0
450,000
Instructions
(a)Computetheamountofrealizedgrossprofitrecognizedineachyear.
(b)Preparealljournalentriesrequiredin2015.
E1823.(Installment-Sales Method and Cost-Recovery Method)
SwiftCorp.,acapitalgoodsmanufacturingbusinessthatstartedonJanuary4,2014,and
operatesonacalendaryearbasis,usestheinstallmentsalesmethodofprofitrecognitionin
accountingforallitssales.Thefollowingdataweretakenfromthe2014and2015records.
2014
2015
Installmentsales
$480,000
$620,000
Grossprofitasapercentofcosts
25%
28%
Cashcollectionsonsalesof2014
$130,000
$240,000
Cashcollectionsonsalesof2015
0
$160,000
Theamountsgivenforcashcollectionsexcludeamountscollectedforinterestcharges.
Instructions
(a)Computetheamountofrealizedgrossprofittoberecognizedonthe2015income
statement,preparedusingtheinstallmentsalesmethod.(Roundpercentagestothree
decimalplaces.)
(b)StatewherethebalanceofDeferredGrossProfitwouldbereportedonthefinancial
statementsfor2015.
(c)Computetheamountofrealizedgrossprofittoberecognizedontheincomestatement,
preparedusingthecostrecoverymethod.
(CIAadapted)
