a. How does the company recognize its revenue to Customer A and Customer B? b. Make a journal on February 1, 2020 and March 1, 2020 (if any)?
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On February 1, 2020, the telecommunications company sold cellular phones and unlimited calls service to Customer A on a 24 month contract. Customer A pays CU30 per month for network and telephone services
mobile 'free'. The Company sells Customer B the same cellular telephone for CU 150 and the same network services for CU 25 per month. The amount is also the price the company charges when the cellular phone or network service is sold separately. The time value effect of money is negligible in this case. Based on the above case, answer the following questions:
a. How does the company recognize its revenue to Customer A and Customer B?
b. Make a journal on February 1, 2020 and March 1, 2020 (if any)?
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- On January 1, 2019, Piper Company entered into an agreement with Save-Mart to sell its most popular product, the gadget. The contract stipulates that the price per unit will decrease as Save-Mart purchases higher volumes of the gadget, as follows: The contract states that Save-Mart pays Piper the unit price based on the current sales volume. Once a volume threshold is reached, the price is retroactively reduced to the applicable price per unit. Based on its past experience with similar contracts, Piper believes that the total sales volume for the year will be 1,800 units and uses the most likely amount approach to estimate variable consideration. In addition, Piper concludes it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur once the uncertainty surrounding the variable consideration is resolved. Required: 1. Determine the transaction price per unit that Piper should use to record revenue. 2. Assume that Save-Mart purchases 800 units in the first quarter of 2019 and 900 units in the second quarter of 2019. Prepare Pipers journal entries to record the sales in the first and second quarters. 3. Given the higher than expected sales volume in the first half of the year, Piper increases its estimate of the sales volume to 2,800 units. Prepare the journal entry to record this change in estimate.On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.Now assume that it is several years later. The brothers are concerned about the firm’s current credit terms of net 30, which means that contractors buying building products from the firm are not offered a discount and are supposed to pay the full amount in 30 days. Gross sales are now running $1,000,000 a year, and 80% (by dollar volume) of the firm’s paying customers generally pay the full amount on Day 30; the other 20% pay, on average, on Day 40. Of the firm’s gross sales, 2% ends up as bad-debt losses. The brothers are now considering a change in the firm’s credit policy. The change would entail: (1) changing the credit terms to 2/10, net 20, (2) employing stricter credit standards before granting credit, and (3) enforcing collections with greater vigor than in the past. Thus, cash customers and those paying within 10 days would receive a 2% discount, but all others would have to pay the full amount after only 20 days. The brothers believe the discount would both attract additional customers and encourage some existing customers to purchase more from the firm—after all, the discount amounts to a price reduction. Of course, these customers would take the discount and hence would pay in only 10 days. The net expected result is for sales to increase to $1,100,000; for 60% of the paying customers to take the discount and pay on the 10th day; for 30% to pay the full amount on Day 20; for 10% to pay late on Day 30; and for bad-debt losses to fall from 2% to 1% of gross sales. The firm’s operating cost ratio will remain unchanged at 75%, and its cost of carrying receivables will remain unchanged at 12%. To begin the analysis, describe the four variables that make up a firm’s credit policy and explain how each of them affects sales and collections.
- On February 1, 2020, the telecommunications company sold cellular phones and unlimited calls service to Customer A with a 24 month contract. Customer A pays CU30 per month for 'free' network and cell phone services. The Company sells Customer B the same cellular phone for CU 300 and the same network services for CU 20 per month.The amount is also the price the company charges when the cellular phone or network service is sold separately. The time value effect of money is negligible in this case. Based on the above case, answer the following questions: How does the company recognize its revenue to customer A and customer B? Proposed a journal on February 1, 2020 and March 1, 2020 (if any)On February 1, 2019, the telecommunications company sold cellular phones and unlimited calls service to Customer #1 on a 24 month contract. Customer 1 pays CU30 per month for 'free' network and cell phone services. The Company sells Customer #2 the same cellular telephone for CU 150 and the same network services for CU 25 per month. The amount is also the price the company charges when the cellular phone or network service is sold separately. The time value effect of money is negligible in this case. Based on the above case, answer the following questions: How the company recognizes its revenue to Customer #1 and Customer #2? Keep a journal on February 1, 2019 and March 1, 2019Yellow Company, a distributor of machinery, bought a machine from the manufacturer in November 2020 for P500,000. On December 30, 2020, the entity sold this machine for P750,000 under the following terms: 2% discount if paid within 30 days, 1% discount if paid after 30 days, or payabl e in full within ninetydays if not paid within the discount periods. However, the customer had the right to return this machine to Yellow Company if it was unable to resell the machine before the expiration of the ninety-day payment period, in which case the customer’s obligation to Yellow Company would be canceled. In the net sales for the year ended december 31,2020, what amount should be included for the sale of the machine? a. 750,000 b. 735,000 c. 742,500 d. 0
- In August 2020, Atlantic Corp, commits to selling 100 of its merchandise to Boy Co. for P30,000 (P300 per product). The merchandise is to be delivered to Boy over the next 6 months. After 60 mierchandises were delivered, the contract is modified and Commonio promises to deliver 80 more products for an additional P21,600 (P270 per station). At year-end, Atlantic delivered an additional 90 products. All sales are cash on delivery Assume that the additional terms anpective modification to the original contract. How much revenue will be recognized on the contract for the year 2020?Zoro Company enters into a contract to sell Product A and Product B on July 1, 2020 for an upfront cash payment of P250,000. Product A will be delivered at the end of the year, and Product B will be delivered the following year. Zoro Company sells Product A for P80,000 and Product B for P240,000. 1. How many performance obligations are there in the contract? 2.what is the transaction price? 3.how much is revenue to be recognized in 2020? 4. how much is revenue to be recognized in 2021?Beautiful Company sold a set of washing machine and a dryer for a total contract price of P100,000 on December 15, 2021. The stand-alone selling prices of the washing machine and the dryer if sold separately are: 150,000 and 70,000, respectively. The washing machine was delivered on December 20, 2021 but the dryer was delivered only on January 5, 2022. *How many performance obligations are there in the contract? *How much is the revenue to be recognized in 2021? *How much is the revenue to be recognized in 2022?
- Luke consulting enters into a contract with Holand University to restructure Holand's process for purchasing goods from suppliers. The contract states that Luke will earn a fixed fee of P25,000and earn an additional P10,000 if Holand achieves P10,000 of cost savings. Luke determines the transaction price as the expected value of expected consideration, what transsaction price will Luke estimate for this contract?On October 2, 2020, Laplante Company sold $6,000 of its elite camping gear (with a cost of $3,600) to Lynch Outfitters. As part of the sales agreement, Laplante includes a provision that if Lynch is dissatisfied with the product, Laplante will grant an allowance on the sales price or agree to take the product back (although returns are rare, given the long-term relationship between Laplante and Lynch). Lynch expects total allowances to Lynch to be $800. On October 16, 2020, Laplante grants an allowance of $400 to Lynch because the color for some of the items delivered was a bit different than what appeared in the catalog. Instructions a. Prepare journal entries for Laplante to record (1) the sale on October 2, 2020, (2) the granting of the allowance on October 16, 2020, and, (c) any adjusting required on October 31, 2020 (when Laplante prepares financial statements). Laplante now estimates additional allowances of $250 will be granted to Lynch in the future. b. Indicate the…On October 2, 2020, Ivanhoe Company sold $5,630 of its elite camping gear (with a cost of $3,320) to Lynch Outfitters. As part of the sales agreement, Ivanhoe includes a provision that if Lynch is dissatisfied with the product, Ivanhoe will grant an allowance on the sales price or agree to take the product back (although returns are rare, given the long-term relationship between Ivanhoe and Lynch). Ivanhoe expects total allowances to Lynch to be $760. On October 16, 2020, Ivanhoe grants an allowance of $400 to Lynch because the color for some of the items delivered was a bit different than what appeared in the catalog. Prepare journal entries for Ivanhoe to record (1) the sale on October 2, 2020, (2) the granting of the allowance on October 16, 2020, and, (3) any adjusting required on October 31, 2020 (when Ivanhoe prepares financial statements). Ivanhoe now estimates additional allowances of $260 will be granted to Lynch in the future. (Credit account titles are…