The following are brief descriptions of two companies in different lines of business. 1. Company A is a retailer. It makes sales on a daily basis for cash and on credit cards. 2. Company B is a health spa. It has recently signed contracts with numerous individuals to use its facilities over a two-year period. The contract price was collected in advance. Describe when revenue should be recognized by each company. If revenue should not be recognized at the time of sale, indicate what method should be used to recognize the revenue. Justify your decision.
The following are brief descriptions of two companies in different lines of business. 1. Company A is a retailer. It makes sales on a daily basis for cash and on credit cards. 2. Company B is a health spa. It has recently signed contracts with numerous individuals to use its facilities over a two-year period. The contract price was collected in advance. Describe when revenue should be recognized by each company. If revenue should not be recognized at the time of sale, indicate what method should be used to recognize the revenue. Justify your decision.
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
Chapter2: Financial Reporting: Its Conceptual Framework
Section: Chapter Questions
Problem 11C
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The following are brief descriptions of two companies in different lines of business.
1. Company A is a retailer. It makes sales on a daily basis for cash and on credit cards.
2. Company B is a health spa. It has recently signed contracts with numerous individuals to use its facilities over a two-year period. The contract price was collected in advance.
Describe when revenue should be recognized by each company. If revenue should not be recognized at the time of sale, indicate what method should be used to recognize the revenue. Justify your decision.
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