BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

Solutions

Chapter
Section
BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
9 views

Each of the following is an independent situation that relates to the recognition of revenue:

  1. a. Collection of a fare by an airline when the passenger makes a reservation
  2. b. Receipt of payment for delivery services prior to the delivery of the goods
  3. c. Sale of an annual pass to a theme park
  4. d. Construction of a home in a subdivision prior to a buyer being identified
  5. e. Payment of insurance coverage at the beginning of the coverage period

Required:

For each situation, indicate if the company should recognize revenue over time or at a point in time. Also, indicate the company’s performance obligation and be as specific as possible as to the time period it is satisfied.

To determine

Indicate whether the company must recognize revenue over time or at a point in time and also mention the performance obligation.

Explanation

Revenue recognition by Companies: Companies must recognise revenues to represent the “Transmission of promised goods and services to customers in an amount that reflects the consideration” to which the entity anticipates to be authorized in exchange for those good and services.

a. Revenue is recognized “at a point in time”. Providing flight to customer is the performance obligation of airlines and it fulfils its performance obligation when the flight occurs. Thus, it recognizes revenue on the date of the flight.

b. Revenue is recognized “at a point in time”. During the supply of the goods, the delivery company satisfies its performance obligation. Thus, it recognizes revenue when the goods are supplied.

c. Revenue is recognized “over time”. Allowing the customers to access to the theme park is the performance obligation and it is satisfied when the theme park is open...

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What are the major tasks involved in managing a sales force?

Foundations of Business (MindTap Course List)

What is commodity money? What is flat money? Which kind do we use?

Brief Principles of Macroeconomics (MindTap Course List)

Until now, we have assumed that XOMs dividend will grow at a long-run constant rate of 5%. To gauge whether thi...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Why should policymakers think about incentives?

Principles of Macroeconomics (MindTap Course List)

What is meant by catering theory, and how might it impact a firm's dividend policy?

Fundamentals of Financial Management (MindTap Course List)

How do joint costs differ from other common costs?

Cornerstones of Cost Management (Cornerstones Series)