Concept explainers
Requirement -1
Rules of Debit and Credit:
Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
- Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
- Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.
The revenue recognition principle:
The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) of the company is completed.
Deferred revenues:
Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an
To describe: The time of revenue recognition from the sale of it season passesfor SW Incorporation.
Requirement - 2
To prepare: The appropriate
3.
To describe: The items which are included in the
Want to see the full answer?
Check out a sample textbook solutionChapter 5 Solutions
INTERMEDIATE ACCOUNTING RMU 9TH EDITION
- Exercise 8-11 (Algo) Record gift card transactions (L08-4) Vall is one of the largest ski resorts in the United States. Suppose that on October 1, 2024, Vail sells gift cards (ift passes) for $102.000. The gift cards are redeemable for one day of skiing during the upcoming winter season. The gift cards expire on April 1, 2025. Customers redeem gift cards of $20,200 in December. $30,200 in January, $25,200 in February, and $15,200 in March. Required: 1. to 4. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet 2 < 1 3 Record the sale of gift cards on October 1, 2024. Note: Enter debits before credits Date October 01, 2024 4 General Journal Debit Creditarrow_forwardExercise 9-5 (Algo) Calculate earned revenues LO 1 Big Blue University has a fiscal year that ends on June 30. The 2019 summer session of the university runs from June 7 through July 26. Total tuition paid by students for the summer session amounted to $112,000. Required: a. How much revenue should be reflected in the fiscal year ended June 30, 2019? X Answer is complete but not entirely correct. Amount of revenue 52,571 X b. Would your answer to part a be any different if the university had a tuition refund policy that no tuition would be refunded after the end of the third week of summer session classes? Yes O No Oarrow_forwardPROBLEM TWO Part A: Revenue Recognition= Loyola Company, a kitchen appliances manufacturer sells 10 washing machines to a dealer for $30,000 in one signed contract. Additionally, Loyola Company offered a $500 cash incentive (price reduction per machine purchased) to the dealer for all machines purchased within two weeks leading to the July 4 holiday. The sale includes three years of maintenance for each of the machines. The standalone selling price of the washing machines is $30,000 and the standalone selling price of the maintenance contract is $2,000. Loyola company purchased the machines at a combined total of $25,000. In answering the following questions, round each amount to the nearest whole dollar. Instructions 1. How many performance obligations are in this contract? 2. Allocate the transaction price to the performance obligations identified in #1 assuming the machines were sold on July 1" (within the offer time). Continued on next negaarrow_forward
- Work Assignment AEST Part 2 of 6 Ever Lawn, a manufacturer of lawn mowers, predicts that it will purchase 324,000 spark plugs next year. Ever Lawn estimates that 27,000 spark plugs will be required each month. A supplier quotes a price of $13 per spark plug. The supplier also offers a special discount option: If all 324,000 spark plugs are purchased at the start of the year, a discount of 2% off the $13 price will be given. Ever Lawn can invest its cash at 8% per year. It costs Ever Lawn $130 to place each purchase order. Required 1. What is the opportunity cost of interest forgone from purchasing all 324,000 units at the start of the year instead of in 12 monthly purchases of 27,000 units per order? 2. Would this opportunity cost be recorded in the accounting system? Why? 3. Should Ever Lawn purchase 324,000 units at the start of the year or 27,000 units each month? Show your calculations. Requirement 1. What is the opportunity cost of interest forgone from purchasing all 324,000…arrow_forwardEXERCISE 13 Pierce Corporation issues gift certificates in denominations of P 300, P 500 and P 1,000.These gift certificates are redeemable in merchandise and expire one year after the issue date. The company's gross profit is an average of 30%. Based on past experience, an average of ½ of 1% of total gift certificates sold will not be redeemed by reason of expiration. The company records revenue as certificates expire. During 2020, the company sold P 2,000,000 gift certificates through its licensed distributors.At the end of the year, total redeemed gift certificates had a sales value of P I,280,000. REQUIRED: Prepare all journal entries pertaining to the above information.Assume that Pierce uses periodic inventory system.arrow_forwardTestbank Multiple Choice Question 93 Vaughn Manufacturing borrowed $413000 on April 1. The note requires interest at 12% and principal to be paid in one year. How much interest is recognized for the period from April 1 to December 31? $33040. $37170. O $0. $49560.arrow_forward
- Exercise 9-7 (Algo) Calculate earned revenues LO 9-1 Big Blue University has a fiscal year that ends on June 30. The 2022 summer session of the university runs from June 10 through July 29. Total tuition paid by students for the summer session amounted to $105,000. Required: a. How much revenue should be reflected in the fiscal year ended June 30, 2022? Note: Do not round intermediate calculations. b. Would there be a change in the revenue reflected if the university had a tuition refund policy that no tuition would be refunded after the end of the third week of summer session classes? a. Amount of revenue b. Would there be a change in the revenue reflected?arrow_forward11:/13 Problem 2-2U S) William Company operates a customer loyalty program. T entity grants loyalty points for goods purchased. The loyalty points can be used by the customers in exchane for goods of the entity. The pointa have no expiry date. During 2020, the entity issued 100,000 award credits and expects that 80% of these award credits shall be redeemed The total stand-alone selling price of the award credita granted is reliably measured at P2,000,000. In 2020, the entity sold goods to customers for a total consideration of P8,000,000 based on stand-alone selling price. The award credits redeemed and the total award credits expected to be redeemed each year are as follows: Redeemed Expected to be redeemed 2020 2021 30,000 15,000 80% 90% 1. What is the revenue from points for 2020? 1,600,000 b. a. 1.500,000 600,000 d. 480,000 2. What is the revenue from points for 2021? a. 240,000 b. 200,000 120,000 04.29arrow_forward81 PROBLEMS Problem 3-1 (IAA) repair warranty The sale price for each set is P15,000. The average repair cost per set is P800. Research has shown that 20% of all sets sold are repaired in thế first year and 40% in the second year. 2020 2021 300 500 150,000 Number of sets sold 40,000 Total payments'for warranty repairs Required: 1. Prepare journal entries in connection with the warranty using the "expense as incurred" approach. 2. Prepare journał entries in connection with the warranty using the "accrual" approach. 3. Determiņe the estimated warranty liability on December 31, 2021 4. Analyze the estimated warranty liability account to ascertain whether actual warranty costs approximate the estimate. The sales and warrantý repairs are made evenly during the year. 5. Prepare journal entry to correct the estimated warranty liability on December 31, 2021. 82 Problem 3-2 (AICPA Adapted) In 2020, Dare Company bęgan sellingarrow_forward
- Exercise 9-5 (Algo) Calculate earned revenues LO 1 Big Blue University has a fiscal year that ends on June 30. The 2019 summer session of the university runs from June 7 through July 26. Total tuition paid by students for the summer session amounted to $112,000.Required:a. How much revenue should be reflected in the fiscal year ended June 30, 2019? b. Would your answer to part a be any different if the university had a tuition refund policy that no tuition would be refunded after the end of the third week of summer session classes?multiple choice Yes noarrow_forwardTopic: Premium Liability Problem 2-21 Arianne 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. During 2020, the sales amount to P7,000,000 based on stand-alone selling price. During the year, the entity granted 10,000 points. But management expected that only 80% or 8,000 points will be redeemed. The stand-alone selling price of each loyalty point is P100. On December 31, 2020, 4,800 points have been redeemed In 2021, management revised its expectations and now expected that 90% or 9,000 points will be redeemed altogether. During 2021, the entity redeemed 2,400 points. Questions: What amount should be reported as sales revenue including the revenue earned from points for 2020? What is the revenue earned from loyalty points for 2021?arrow_forwardPhotos - Inkedwgkladm_processed_LI.jpg A See all photos + Add to * Edit & Create v CASE 1 On January 1, 20x1, Marc Company enters into a contract with a customer to transfer a license. The initial franchise fee is P200,000, payable as follows: 20% cash down payment upon signing of the contract, and the balance is payable in four (4) equal annual installments starting December 31, 20X1. The appropriate discount rate is 10%. The contract also requires Marc Company to transfer equipment to the customer. The equipment has a cost of P30,000 and a stand-alone selling price of P50,000. The license has a stand-alone selling price of P38,000. Marc Company regularly sells the license and the equipment separately. The equipment is transferred to the customer on January 15, 20x1, while the license is transferred to the customer on February 1, 20x1. REQUIRED: Compute the following: 2. Transaction price allocated to license 3. Transaction price allocated to equipment 4. Franchise fee revenuearrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning