Many companies use contra-revenue accounts to describe a reduction in Service Revenue (also Sales Revenue). These accounts include Sales Discount, Sales Allowance, and Sales Returns.
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- Choose a company and explain how a specific issue, policy, or procedure (for example, granting merchandise returns, establishing sales prices) might look if the business is structured as a decentralized business.Choose a company and describe how a specific issue, policy, or procedure (for example, granting merchandise returns, establishing sales prices) might look if the business is structured as a centralized business.Codification Situation You are conducting an accounting research project for your boss. Your boss has asked you to determine the appropriate U.S. GAAP that specifies how your company should recognize revenues from the sales of products in a retail store. Your boss is confused because most customers pay cash, but some customers purchase on credit terms, and pay in cash 30 days later. Your manager also wants you to determine the GAAP guidance for how revenue should be recognized in income. Your manager has a lot of knowledge and experience in accounting and has heard about, but has never used, the FASB Accounting Standards Codification system. Directions Use the FASB Accounting Standards Codification system to conduct the research your manager has assigned to you. Use the Codification to determine how to recognize revenue from retail sales, including the right to return. Be prepared to show your manager the specific FASB ASC references that provide the appropriate guidance. Also prepare a brief memo explaining to your manager the different levels of the Codification and how to use the Codification system.
- For the following descriptions, state whether the cost is controllable or uncontrollable by responsibility center managers. A. advertising for a merchandiser B. corporate income taxes C. office supplies for a merchandiser D. donations to the Salvation Army E. insurance for delivery vehiclesWhat is the financial impact on a company when a customer returns a product for a refund?a. Sales revenue will decrease because sales revenue will be debited.b. Sales revenue will not be impacted because the company has already accrued forestimated refunds and returns.c. Sales revenue will increase because sales revenue will be credited.d. Returns expense will increase because returns expense will be debited.“A customer-profitability profile highlights those customers a company should drop to improve profitability.” Do you agree? Explain.
- From the Horizontal Analysis, prepare a sales revenue forecast assuming no changes in business environment and operations.Recalculate the customer-level operating income if salespeople had not broken up actual orders into multiple smaller orders. Don’t forget to also adjust sales commissions.Directions: Read the given sentences carefully. Select the best answer from the choices given below. Write your answer on the space provided before each item. Gains Purchases Sales Income Gross Profit Sales Discount Selling expenses Professional Fee Net Income Operating expenses Sales return Cost of Goods Sold Service Income 1. An example of service revenue. 2. The revenue generated from the sale of products. 3. It is computed by deducting the cost of sales from net sales. 4. It is used to describe revenue derived from the rendering of services. 5. A type of income derived from the other activities of the business. 6. The account used to report the acquisitions of merchandise for sale. 7. It represents the actual cost of inventories that the company was able to sell. 8. These are expenses that are directly related to the main purpose of a merchandising business 9. A contra-sales account that is used to report the amount of discount given to or taken by the customers. 10. It refers…
- APPLY THE CONCEPTS: Target income (sales revenue) Another useful method for figuring out the type of performance your company will need to reach a target income is by using sales revenue. Rather than using the number of units, this method uses total sales revenue. In companies for which the total set of goods produced and sold is more varied, this would be the preferred method, as opposed to a business in which only one product is sold. Assume a company has pricing and cost information as follows: Price and Cost Information Amount Selling Price per Unit $30 Variable Cost per Unit $15 Total Fixed Cost $15,000 For the upcoming period, the company wishes to generate operating income of $40,000. Given the cost and pricing structure for the company’s product, how much sales revenue must it generate to attain its target income? Step 1: Calculate the contribution margin ratio: The contribution margin ratio is the contribution margin in proportion to the selling price on a…n: In a sheet of paper, write TRUE if the statement is correct and FALSE if the statement is incorrect. 1. The revenue earned by a service business for rendering services for a fee is commonly referred to as Service Income or Service Revenue. 2. A Statement of Comprehensive Income may be presented using a “multistep statement” presentation only. 3. Revenue includes both income and gains. 4. If expenses are greater than income, the difference is net loss. 5. The revenue earned by the merchandising business from its sales of goods is commonly referred to as Sales. 6. Income increases economic benefits during the period in the form of inflows of cash from rendering services. 7. The statement of Comprehensive Income shows information on an entity’s financial performance during the period. 8. A Statement of Comprehensive Income that shows expenses by its function is referred to as prepared using a single-step approach. 9. Expenses encompass both…Which of the following statements is correct?a. Sales returns and allowances increase a company’s profit.b. If a customer returns a product, sales revenue will be credited.c. The performance obligation in a sale of products is generally satisfied when thecustomer orders the products.d. A company must accrue for estimated future returns at the end of the period in whichthe related sales revenue is recognized.