Coconut Telegraph Essay

* In our opinion, Partial Revenue Recognition approach is most consistent with the actual substance of a sales transaction involving an extended warranty contract. Using partial revenue recognition, the company can recognize partial revenue at the time of sale. We can distinguish between what is earned and what is yet to be earned. At the time of sale, the company recognized a portion of the revenue that they earned on the total sales because the warranty contract is incomplete. It recognizes the rest portion of the sale as deferred revenue and records “over the contract period” (Bruns 3). This method let the sales revenue and liabilities account to

Revenues are recognized at the POS, when a fixed sales price is established, and collection is probable. For most product sales, these criteria are met when a product is shipped. Online sales are deferred until the customer receives their product, and the transfer of liability is completed.

605-25-25-3, Revenue Recognition-Multiple Element Arrangements-Recognition; separated contract with the same entity, near or at the same time are considerate as a package.

The conditions for this alternative are very similar to alternative #2 in the aspect that the only thing that has changed is the condition for the collectability. If we decide to recognize the partial revenue of $15,000 on October 4, 2015, when the customer pays the remaining $15,000, collectability is assured 100 percent because all the payment has been paid. In

Gary Soto was born April 12, 1952, in Fresno, California to Mexican-American parents. His grandparents emigrated from Mexico during the Great Depression and found jobs as farm laborers. Soto grew up poor in the San Joaquin Valley and learned that hard work pays off through chores, such as moving lawns, picking grapes, painting houses, and washing cars.

5. No because the amount of the invoice fluctuates for the same product in this type of scheme and therefore it would be difficult to figure out how much the invoice should have been made out for.

On May 1, 2012, and in a separate contract, Coconut agreed to provide Buffett with (1) training services on the customer management system and (2) an additional year of PCS.

The two units of accounting listed under the agreement between Eye Vision and Holland Hospital are the Clear View Laser and the maintenance plan. According to ASC 605-25-25-5, "In an arrangement with multiple deliverables, the delivered item or items shall be considered a separate unit of accounting if both of the following criteria are met." The first criterion under ASC 605-25-25-5 states, "The delivered item or items have value to the customer on a standalone basis. The item or items have value on a standalone basis if they are sold separately by any vendor or the customer could resell the delivered item(s) on a standalone basis." In the case, the Clear View laser is sold only with the embedded software for proper functionality. In the event the sale is isolated, the software and laser have no independent value to the consumer considering the safety reasons of the medical devices. The

c. ASC 605-28-25-3 states that in order to “…recognize the milestone consideration in its entirety as revenue in the period in which the milestone is achieved, the milestone shall be substantive in its entirety.”

This links to the G.L. control account which in the purchasing cycle is accounts payable. However, the system allows a company to set up multiple reconciliation accounts. For example, a company may want to separate the vendors by geographic region. This is easily done by having different AP control controls for different geographic regions.

A bill-and-hold transaction is when the seller bills the customers for a product and records it as revenue, but does not ship the product to the customer until a later date. FASB states that revenue can not be recognized until the product is shipped to the final customer. Kelly Electronics will be receiving the products by March 31, 2017, but the final customer, Victor Systems will not, so under FASB, revenue should not be recognized until the goods are shipped to Victor Systems. The SEC also has certain criteria that needs to be met before South City Electronics can recognize this revenue. A few of these criteria’s are: “the risks of ownership must have passed to the buyer”, “the buyer, not the seller, must request the transaction be on

Coconut Telegraph Corporation (Coconut) is a developer and provider of specialized customer billings and management software and systems. On February 1, 2012, Coconut had an arrangement with Buffet Worldwide Inc. (Buffet) to deliver the Volcano System and provide one year of post contract customer support (PCS). The PCS will start March 1, 2012. At the time of the arrangement, February 1, 2012, Buffet paid $12,000 for the Volcano System and the one year of PCS.

The Great Western Bank of San Diego placed an order of 12 special purpose accounting machines with the Data Max Corporation of Cincinnati, OH. Great Western Bank and Data Max, both agreed to a firm-fixed price of $9,500 per unit and FOB the shipping point. The purchasing manager of the bank designated a particular carrier (yellow freight) and Data Max returned the signed acknowledgement without making any changes to the terms and conditions.

For each of the specific contracts described in the case, please describe the best revenue recognition policy considering the criteria in SAB 101. (Onsetcom, Cataumet, Sandham, XLSemi, Technical Devices and Ashaban)

As a result we can see that only one of the four above criteria is met and it is a fixed price. Based on these findings we can advise to change WAG’s policy on revenue recognition upon the delivery of the product. This will lower the sales revenue by $50,000, as well as cost of goods sold and net income.