Nerina Traders, a gift shop, situated in Illovo is owned by Serena Lopez. The business is a registered VAT vendor and trades only with other registered vendors. All amounts including 15% VAT where applicable, except if otherwise indicated. They use a periodic inventory system and all goods are marked up at 20% above cost, before considering any trade discounts. The business does not expect to award any settlement discounts nor to qualify for any settlement discounts. All occurrences of settlement discounts are therefore incidental in nature. Debtors balances as at 31 January 2020: Pinky Leshaba R3 500.

Nerina Traders, a gift shop, situated in Illovo is owned by Serena Lopez. The business is a registered VAT vendor and trades only with other registered vendors. All amounts including 15% VAT where applicable, except if otherwise indicated. They use a periodic inventory system and all goods are marked up at 20% above cost, before considering any trade discounts. The business does not expect to award any settlement discounts nor to qualify for any settlement discounts. All occurrences of settlement discounts are therefore incidental in nature. Debtors balances as at 31 January 2020: Pinky Leshaba R3 500.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 6MC

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Nerina Traders, a gift shop situated in Illovo, is owned by Serena Lopez. The business is a registered VAT vendor and trades only with other registered vendors. All amounts, including 15% VAT where applicable, except if otherwise indicated. They use a periodic inventory system, and all goods are marked up at 20% above cost before considering any trade discounts. The business does not expect to award any settlement discounts nor toqualify for any settlement discounts. All occurrences of settlement discounts are therefore incidental in nature.Debtors balances as at 31 January 2020:Pinky Leshaba R3 500.The following transactions took place in the month of February 2020: DATE TRANSACTION 1 Sold goods on credit to Pinky Leshaba for R2 500, excludingVAT 4 The invoice provided to Pinky Leshaba on the 1st of February wasovercast by R230, including VAT. Pinky Leshaba has acceptedthis amount and the error needs to be corrected. Hint: thisshould be treated similarly as a rebate 6 Goods…
Clivia Traders, a stationery shop, situated in Sea Point is owned by Daisy Garden. The business is a registered VAT vendor and trades only with other registered vendors. All amounts include 15% VAT where applicable, except if otherwise indicated. They use a perpetual inventory system and all goods are marked up at 20% above cost, before taking into account any trade discounts. The business does not expect to award any settlementdiscounts nor to qualify for any settlement discounts. All occurrences of settlement discounts are therefore incidental in nature.All money received is banked daily.The following transactions took place in the month of February 2020 DATE TRANSACTION1 Owner contributed R5 000 cash4 Cash sales R13 800 including VAT6 Cash purchases R8 000 excluding VAT10 Paid Telkom for telephone account R34515 Paid R2 000 towards a loan settlement with Mzanzi Bank20 Cash sales R5 750 including VAT23 Cash purchases R4 600 including VAT25 Paid wages R800 Prepare the following…
Clivia Traders, a stationery shop, situated in Sea Point is owned by Daisy Garden. The business is a registered VAT vendor and trades only with other registered vendors. All amounts include 15% VAT where applicable, except if otherwise indicated. They use a perpetual inventory system and all goods are marked up at 20% above cost, before taking into account any trade discounts. The business does not expect to award any settlementdiscounts nor to qualify for any settlement discounts. All occurrences of settlement discounts are therefore incidental in nature.All money received is banked daily.The following transactions took place in the month of February 2020 DATE TRANSACTION1 Owner contributed R5 000 cash4 Cash sales R13 800 including VAT6 Cash purchases R8 000 excluding VAT10 Paid Telkom for telephone account R34515 Paid R2 000 towards a loan settlement with Mzanzi Bank20 Cash sales R5 750 including VAT23 Cash purchases R4 600 including VAT25 Paid wages R800 Prepare the following…
Clivia Traders, a stationery shop, situated in Sea Point is owned by Daisy Garden. The business is a registered VAT vendor and trades only with other registered vendors. All amounts include 15% VAT where applicable, except if otherwise indicated. They use a perpetual inventory system and all goods are marked up at 20% above cost, before taking into account any trade discounts. The business does not expect to award any settlement discounts nor to qualify for any settlement discounts. All occurrences of settlement discounts are therefore incidental in nature. All money received is banked daily. The following transactions took place in the month of February 2020 : DATE TRANSACTION 1 Owner contributed R5 000 cash 4 Cash sales R13 800 including VAT 6 Cash purchases R8 000 excluding VAT 10 Paid Telkom for telephone account R345 15 Paid R2 000 towards a loan settlement with Mzanzi Bank 20 Cash sales R5 750 including VAT 23 Cash purchases R4 600 including VAT 25 Paid wages R800 Q.4.1 Prepare…
Clivia Traders, a stationery shop, situated in Sea Point is owned by Daisy Garden. The business is a registered VAT vendor and trades only with other registered vendors. All amounts include 15% VAT where applicable, except if otherwise indicated. They use a perpetual inventory system and all goods are marked up at 20% above cost, before taking into account any trade discounts. The business does not expect to award any settlement discounts nor to qualify for any settlement discounts. All occurrences of settlement discounts are therefore incidental in nature. All money received is banked daily. The following transactions took place in the month of February 2020 : DATE TRANSACTION 1 Owner contributed R5 000 cash 4 Cash sales R13 800 including VAT 6 Cash purchases R8 000 excluding VAT 10 Paid Telkom for telephone account R345 15 Paid R2 000 towards a loan settlement with Mzanzi Bank 20 Cash sales R5 750 including VAT 23 Cash purchases R4 600 including VAT 25 Paid wages R800 Q.4.1 Prepare…
On December 1, 2021 Cardinal Company, a garden retailer, purchased $20,000 of corn seed, terms 2/10, n/30, from IowaFarm Co. Even though the discount period had expired, Rosa Lopez subtracted the discount of $400 when she processedthe documents for payment on December 15, 2021. Discuss whether Rosa Lopez behaved in a professional manner by subtracting the discount, even though the discount period had expired.
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…
EM Company, a grocery retailer, operates a customer loyalty program. The entity grants program members loyalty points when they spend a specified amount on groceries. Program members can redeem the points for further groceries. The points have no expiry date. During2019, the sales amounted to P7,000,000 and the entity have granted 10,000points. Management expects that only 80% of the points will be redeemed. The cost of each loyalty point is P100. As of December 31, 2019, 4,800 points have already been redeemed. In2020, the management revised its expectations to 90% of the points will be redeemed. As of December 31, 2020, the entity redeemed 2,400 points. What amount should be reported as revenue earned from loyalty points in 2020? A.P700,000B.P210,000C.P175,000D.P200,000
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…
Furtastic manufactures imitation fur garments. On June 1, 2018, Furtastic made a sale to Willett’s DepartmentStore under terms that require Willett to pay $150,000 to Furtastic on June 30, 2018. In a separate transaction onJune 15, 2018, Furtastic purchased brand advertising services from Willett for $12,000. The fair value of thoseadvertising services is $5,000. Furtastic expects that 3% of all sales will prove uncollectible.Required:1. Prepare the journal entry to record Furtastic’s sale on June 1, 2018.2. Prepare the journal entry to record Furtastic’s purchase of advertising services from Willett on June 15, 2018.Assume all of the advertising services are delivered on June 15, 2018.3. Prepare the journal entry to record Furtastic’s receipt of $150,000 from Willett on June 30, 2018.4. How would Furtastic’s expectation regarding uncollectible accounts affect its recognition of revenue from thesale to Willett’s Department Store on June 1, 2018? Explain briefly
Wildhorse Manufacturing Inc. is a local manufacturing company. Rather than sell its product directly, Wildhorse ships its finished goods inventory to CMR Retailing Ltd., who sells the product for Wildhorse on consignment. During 2020, Wildhorse ships $119,500 in merchandise to CMR. At the end of 2020, CMR has sold 65% of the merchandise for $72,000. CMR notifies Wildhorse of the sales, retains a 20% commission, and remits the cash due to Wildhorse. Prepare all the necessary journal entries on the books of Wildhorse Manufacturing to record the consignment transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No. Account Titles and Explanation Debit Credit 1. (To record shipped merchandise) 2. (To record year end sales entry)…
PEANUTS Company, a grocery retailer operates a customer loyalty program. It grants program members loyalty points when they spend a specified amount of groceries. Program members can redeem the points for further groceries. The points have no expiry date. During the year 2020, the entity grants 100,000 points, but management expects that only 80,000 points will be redeemed. The management of PEANUTS estimates the fair value of each loyalty point to be ₱1, and defers revenue in the amount of ₱100,000. During the year 2020, the company had redeemed 40,000 points. But during the year 2021, the management revises their expectation, it now expects to redeem 90,000 points. In 2021, the company redeemed 45,000 points. What amount of revenue from loyalty program should PEANUTS recognize for the year ended December 31, 2021? * ₱ 50,000 ₱ 20,000 ₱ 25,000 ₱ 45,000