Concept explainers
Requirement – 1
Performance obligation:
Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.
Transaction price:
Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows:
- Variable amount of consideration and the restriction on its recognition.
- Rights for sales return
- Whether the seller is acting as a principal or an agent
- Time value of money
- Payments by the seller to the customer.
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.
To determine: The number of performance obligations exist in the contract.
Requirement – 2
To prepare: The
Requirement – 3
To prepare: The journal entry for Gold examiner would record on March 30.
Requirement – 4
To prepare: The journal entry for Gold examiner would record on April 1.
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INTERMEDIATE ACCOUNTING, W/CONNECT
- Problem 12 On January 1, GEN enters into a contract with LORD for the sale of a high-end security scanner for P630,000. The contract includes a put option the obliges GEN to repurchase the scanner machine from LORD for P567,000 on or before December 31. The market value is expected to be P495,000 on December 31. LORD pays GEN P630,000 on January 1. The transaction should be accounted for as a: A. Sale C. No sale/lease B. Lease D. Cannot be determined Problem 13 Noreen INC a truck dealer, sells a truck on January 1, 2019, to Mendoza for P3,000,000. Noreen INC agrees to repurchase the truck on December 31, 2020 for P3,630,000. 1. Assuming a 10% is imputed in the agreement, how much is the liability of Tom Co on January 1, 2019? A. 1,500,000 C. 3,000,000 B. 1,815,000 D. 3,630,000 2. Using the information above, what is the interest expense for 2019? A. None C. 330,000 B. 300,000 D. 630,000 3. How much should NOREEN INC record interest and retirement of its liability to MENDOZA INC…arrow_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_forwardProblem 6-2 (Algo) Performance obligations; warranties; option [LO6-2, 6-4, 6-5] Creative Computing sells a tablet computer called the Protab. The $890 sales price of a Protab Package includes the following: • One Protab computer. • A 6-month limited warranty. This warranty guarantees that Creative will cover any costs that arise due to repairs or replacements associated with defective products for up to six months. • A coupon to purchase a Creative Probook e-book reader for $145, a price that represents a 50% discount from the regular Probook price of $290. It is expected that 25% of the discount coupons will be utilized. • A coupon to purchase a one-year extended warranty for $65. Customers can buy the extended warranty for $65 at other times as well. Creative estimates that 35% of customers will purchase an extended warranty. • Creative does not sell the Protab without the limited warranty, option to purchase a Probook, and the option to purchase an extended warranty, but estimates…arrow_forward
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