Business
Engineering
Math
Science
Social Science
Cornerstones of Financial Accounti...
Solutions
Cornerstones of Financial Accounti...
Case 3-73 Recognition of Service Contract Revenue
Zac Murphy is president of Blooming Colors Inc. which provides landscaping services in Tallahassee, Florida. On November 20, 2019, Mr. Murphy signed a service contract with Eastern State University. Under the contract, Blooming Colors will provide landscaping services for all Of Eastern’s buildings for a period of 2 years beginning on January l, 2020, and Eastern will pay Blooming Colors on a monthly basis beginning on January 31, 2020. Although the same amount of landscaping services will be rendered in every month, the contract provides for higher monthly payments in the first year.
Initially, Mr. Murphy proposed that the revenue from the contract should be recognized when the contract is signed in 2019; however, his accountant, Sue Storm, convinced him that this would be inappropriate. Then Mr. Murphy proposed that the revenue should be recognized in an amount equal to the cash collected under the contract. Again, Ms. Storm argued against his proposal, indicating that generally accepted accounting principles (GAAP) required recognition of an equal amount of contract revenue each month.
Required:
Put yourself in the position of Sue Storm. How would you convince Mr. Murphy that his two proposals are unacceptable and that an equal amount of revenue should be recognized every month?
Concept Introduction:
Revenue Recognition Principle:
Revenue Recognition Principle states that the revenue should be recorded only when the goods or services are sold and delivered to the customer and the value of goods or service is determinable and collection of the money is not doubtful.
The reason behind the equal recognition of the revenue every month.
Revenue Recognition Principle states that the revenue should be recorded only when the goods or services are sold and delivered to the customer and the value of goods or service is determinable and collection of the money is not doubtful.
Mr. Murphy would like to recognize the contract revenue earlier rather than later in order to improve the profitability for earlier year...
Chapter 3 Solutions
Additional Business Solutions
Find more solutions based on key concepts
Show solutions addWhy do we need to document an information system (or business process)?
Accounting Information Systems
Appendix 1 Adjustment data on an end-of-period spreadsheet Alert Security Services Co. offers security services...
Financial & Managerial Accounting
Capital expenditure and depreciation Willow Creek Company purchased and installed carpet in its new general off...
Corporate Financial Accounting
If a companys board of directors wants management to maximize shareholder wealth, should the CEOs compensation ...
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
A sample of midterm grades for five students showed the following results: 72, 65, 82, 90, 76. Which of the fol...
STATISTICS F/BUSINESS+ECONOMICS-TEXT
Which goods will a nation typically import? a. those goods in which the nation has an absolute advantage b. tho...
Principles of Microeconomics (MindTap Course List)
For any events A and B with P(B) 0, show that P(A|B) + P(A|B) = 1.
Probability and Statistics for Engineering and the Sciences
Who are some of the basic users of financial statements, and how do they use them?
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
The demand for beer is more elastic than the demand for milk. Would a tax on beer or a tax on milk have a large...
Principles of Macroeconomics (MindTap Course List)
Instant Messaging: Practicing Your Professional 1M Skills: Communication Technology Social Media Web Team. In t...
Essentials of Business Communication (MindTap Course List)
From 2008 to 2012, the ratio of government debt to GDP in the United States a. increased markedly. b. decreased...
Brief Principles of Macroeconomics (MindTap Course List)
Is absolute advantage or comparative advantage more important for trade? Explain your reasoning using the examp...
Principles of Economics (MindTap Course List)
WACC Olsen Outfitters Inc. believes that its optimal capital structure consists of 55% common equity and 45% de...
Fundamentals of Financial Management (MindTap Course List)
What rights do stockholders have?
Foundations of Business (MindTap Course List)
(Law of Diminishing Marginal Utility) Complete each of the following sentences: a. Your tastes determine the __...
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
What behavioral problems are associated with setting a budget too loosely?
Financial And Managerial Accounting
What is the difference between decision making and problem solving?
Fundamentals of Information Systems
What is r2,‘, and how is it used to evaluate how well data fits a linear regression model?
Fundamentals of Information Systems
Use the Internet to find information about referential integrity. Write two or three paragraphs that describe w...
A Guide to SQL
Describe the Big Data phenomenon.
Database Systems: Design, Implementation, & Management
Identify six major branches of artificial intelligence.
Principles of Information Systems (MindTap Course List)
Explain the differences among data, information, and a database.
Database Systems: Design, Implementation, & Management
Using the Web, explore the technique known as iterative and incremental development. Then, investigate agile de...
Principles of Information Security (MindTap Course List)
Describe the operation of a digital EGR valve.
Automotive Technology: A Systems Approach (MindTap Course List)
How might Nordstroms decision to move many of its technology innovators out of its central Innovation Lab and i...
Principles of Information Systems (MindTap Course List)
How must the feed rate for tapping using a floating holder be programmed differently than that for rigid tappin...
Precision Machining Technology (MindTap Course List)
Identify and list at least ten different materials that are used in a car.
Engineering Fundamentals: An Introduction to Engineering (MindTap Course List)
Redo Problem 2.7 according to the AASHTO system (Table 2.3). 2.7 The particle characteristics of a soil are giv...
Fundamentals of Geotechnical Engineering (MindTap Course List)
A bar AB of length L is held between rigid supports and heated no uniformly in such a manner that the temperatu...
Mechanics of Materials (MindTap Course List)
One of your coworkers says, “Mission statements are nice, buy they really don’t change things down here whe...
Systems Analysis and Design (Shelly Cashman Series) (MindTap Course List)
What is an alternative model to the BS7799 model (and its successors)? What does it include?
Management Of Information Security
In selsyn motors, AC power is connected to what?
Electric Motor Control
A large furniture manufacturer produces 1000 tons of industrial solid waste per day. This firm has decided to l...
Solid Waste Engineering
A Wi-Fi system is (required) (optional). (Circle the correct answer.)
EBK ELECTRICAL WIRING RESIDENTIAL
Determine the moment of the force F about point A in terms of F and d. Use (a) the scalar method; and (b) the v...
International Edition---engineering Mechanics: Statics, 4th Edition
Repeat Problem 2.8 using the following data. 2.8 The following are the results of a sieve and hydrometer analys...
Principles of Geotechnical Engineering (MindTap Course List)
Convert 10,000 ft-lbf of energy into BTU, Joules, and kilojoules.
Fundamentals of Chemical Engineering Thermodynamics (MindTap Course List)
Use Mannal Table 6-2 and ASD to determine whether a W1855 has enough moment strength for the following conditio...
Steel Design (Activate Learning with these NEW titles from Engineering!)
What is the basic fuel for a fuel cell? a. Hydrogen b. Methanol c. Electricity d. Gasoline
Automotive Technology
To retrieve or select data in a database, you query it. (511)
Enhanced Discovering Computers 2017 (Shelly Cashman Series) (MindTap Course List)
A neighbor hacks into your secured wireless network on a regular basis, but you didnt give him the password. Wh...
Network+ Guide to Networks (MindTap Course List)
