[SOLVED] Explain how to account for the impairment

> Revenue is recognized for accounting purposes when a performance obligation is satisfied. In some situations, revenue is recognized over time as the fair values of assets and liabilities change. In other situations, however, accountants have developed gu

> Griseta & Dubel Inc. was formed early this year to sell merchandise credits to merchants, who distribute the credits free to their customers. For example, customers can earn additional credits based on the dollars they spend with a merchant (e.g., ai

> Judy Schaeffer is getting up to speed on the new guidance on revenue recognition. She is trying to understand the revenue recognition principle as it relates to the five-step revenue recognition process. Instructions a. Describe the revenue recognitio

> Describe the accounting for refund liabilities.

> Referring to the revenue arrangement in BE18-6, determine the transaction price for the contract, assuming a. Nair is only able to estimate whether the building can be completed by August 1, 2018, or not (Nair estimates that there is a 70% chance that t

> Nair Corp. enters into a contract with a customer to build an apartment building for $1,000,000. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $150,000 to be paid if the building is ready fo

> Fairbanks Corporation purchased 400 shares of Sherman Inc. common stock for $13,200 (Fairbanks does not have significant influence). During the year, Sherman paid a cash dividend of $3.25 per share. At year-end, Sherman stock was selling for $34.50 per s

> Ragatz, Inc., a drug company, reported the following information. The company prepares its financial statements in accordance with GAAP. 2017 (,000) Current liabilities……………………………….$ 554,11

> The financial statements of P&G are presented in Appendix B. The company’s complete annual report, including the notes to the financial statements, is available online. Instructions Refer to P&G’s financial statements and accompanying notes to answer

> The financial statements of P&G are presented in Appendix B. The company’s complete annual report, including the notes to the financial statements, is available online. Instructions Refer to P&G’s financial statements and the accompanying notes to answ

> The financial statements of P&G are presented in Appendix B. The company’s complete annual report, including the notes to the financial statements, is available online. Instructions Refer to P&G’s financial statements and the accompanying notes to ans

> The financial statements of Coca-Cola and PepsiCo are presented in Appendices C and D, respectively. The companies’ complete annual reports, including the notes to the financial statements, are available online. Instructions Use the companies’ financi

> Destin Company signs a contract to manufacture a new 3D printer for $80,000. The contract includes installation which costs $4,000 and a maintenance agreement over the life of the printer at a cost of $10,000. The printer cannot be operated without the i

> The financial statements of Coca-Cola and PepsiCo are presented in Appendices C and D, respectively. The companies’ complete annual reports, including the notes to the financial statements, are available online. Instructions Use the companies’ financi

> The financial statements of Coca-Cola and PepsiCo are presented in Appendices C and D, respectively. The companies’ complete annual reports, including the notes to the financial statements, are available online. Instructions Use the companies’ financia

> The financial statements of Coca-Cola and PepsiCo are presented in Appendices C and D, respectively. The companies’ complete annual reports, including the notes to the financial statements, are available online. Instructions Use the companies’ financi

> DeJohn Company, which began operations at the beginning of 2015, produces various products on a contract basis. Each contract generates a gross profit of $80,000. Some of DeJohn’s contracts provide for the customer to pay on an installment basis. Under t

> On January 1, 2016, Garner issued 10-year, $200,000 face value, 6% bonds at par. Each $1,000 bond is convertible into 30 shares of Garner $2 par value common stock. The company has had 10,000 shares of common stock (and no preferred stock) outstanding th

> PENCOMPâs balance sheet at December 31, 2017, is as follows. Accounting Prepare an income statement for 2018 and a balance sheet as of December 31, 2018. Also, prepare the pension expense journal entry for the year ended December 31,

> Diversified Industries manufactures sump-pumps. Its most popular product is called the Super Soaker, which has a retail price of $1,200 and costs $540 to manufacture. It sells the Super Soaker on a standalone basis directly to businesses. Diversified als

> Instar Company has several investments in the securities of other companies. The following information regarding these investments is available at December 31, 2017. 1. Instar holds bonds issued by Dorsel Corp. The bonds have an amortized cost of $320,0

> Engelhart Implements Inc. sells tractors to area farmers. The price for each tractor includes GPS positioning service for 9 months (which facilitates field settings for planting and harvesting equipment). The GPS service is regularly sold on a standalone

> Frozen Delight, Inc. charges an initial franchise fee of $75,000 for the right to operate as a franchisee of Frozen Delight. Of this amount, $25,000 is collected immediately. The remainder is collected in four equal annual installments of $12,500 each. T

> Identify the five steps in the revenue recognition process.

> What was viewed as a major criticism of GAAP as it relates to revenue recognition?

> Identify and explain the three types of classifications for investments in debt securities.

> Describe the revenue recognition principle.

> Explain the current environment regarding revenue recognition.

> What is service cost, and what is the basis of its measurement?

> Pretax financial income for Lake Inc. is $300,000, and its taxable income is $100,000 for 2018. Its only temporary difference at the end of the period relates to a $70,000 difference due to excess depreciation for tax purposes. If the tax rate is 40% for

> Roth Inc. has a deferred tax liability of $68,000 at the beginning of 2018. At the end of 2018, it reports accounts receivable on the books at $90,000 and the tax basis at zero (its only temporary difference). If the enacted tax rate is 34% for all perio

> What is an uncertain tax position, and what are the general guidelines for accounting for uncertain tax positions?

> On October 10, 2017, Executor Co. entered into a contract with Belisle Inc. to transfer Executor’s specialty products (sales value of $10,000, cost of $6,500) on December 15, 2017. Belisle agrees to make a payment of $5,000 upon delivery and signs a prom

> Hillside Company enters into a contract with Sanchez Inc. to provide a software license and 3 years of customer support. The customer-support services require specialized knowledge that only Hillside Company’s employees can perform. How many performance

> Explain the accounting for contract modifications.

> What are the two types of warranties? Explain the accounting for each type.

> What qualitative and quantitative disclosures are required related to revenue recognition?

> Explain the reporting for a. costs to fulfill a contract and b. collectibility.

> In what situation will the unrealized holding gain or loss on inventory be reported in income?

> Describe the conditions when contract assets and liabilities are recognized and presented in financial statements.

> Campus Cellular provides cell phones and 1 year of cell service to students for an upfront, nonrefundable fee of $300 and a usage fee of $5 per month. Students may renew the service for each year they are on campus (on average, students renew their servi

> What is meant by the term “underlying” as it relates to derivative financial instruments?

> What are the reporting issues in a sale with a repurchase agreement?

> Under what conditions does a company recognize revenue over a period of time?

> Use the information from BE17-1 but assume the bonds are purchased as an available-for-sale security. Prepare Garfield’s journal entries for a. the purchase of the investment, b. the receipt of annual interest and discount amortization, and c. the yea

> In measuring the transaction price, explain the accounting for a. time value of money, and b. noncash consideration.

> Explain the accounting for sales with right of return.

> How do companies recognize revenue from a performance obligation over time?

> Where on the asset side of the balance sheet are debt investments classified as trading securities, available-for sale securities, and held-to-maturity securities reported? Explain.

> When does a company satisfy a performance obligation? Identify the indicators of satisfaction of a performance obligation.

> Fuhremann Co. is a full-service manufacturer of surveillance equipment. Customers can purchase any combination of equipment, installation services, and training as part of Fuhremann’s security services. Thus, each of these performance obligations are sep

> On what basis should the transaction price be allocated to various performance obligations? Identify the approaches for allocating the transaction price.

> Refer to the information in Question 14. Assume that Allee has limited experience with a construction project on the same scale as the 10 speedboats. How does this affect the accounting for the variable consideration? From question 14: Allee Corp. is ev

> At December 31, 2017, Reid Company had 600,000 shares of common stock issued and outstanding, 400,000 of which had been issued and outstanding throughout the year and 200,000 of which were issued on October 1, 2017. Net income for 2017 was $2,000,000, an

> Turner, Inc. began work on a $7,000,000 contract in 2017 to construct an office building. During 2017, Turner, Inc. incurred costs of $1,700,000, billed its customers for $1,200,000, and collected $960,000. At December 31, 2017, the estimated additional

> Distinguish between the accounting treatment for marketable versus nonmarketable equity securities.

> Allee Corp. is evaluating a revenue arrangement to determine proper revenue recognition. The contract is for construction of 10 speedboats for a contract price of $400,000. The customer needs the boats in its showrooms by February 1, 2018, for the boat p

> What are some examples of variable consideration? What are the two approaches for estimating variable consideration?

> What is the transaction price? What additional factors related to the transaction price must be considered in determining the transaction price?

> When must multiple performance obligations in a revenue arrangement be accounted for separately?

> Indicate how unrealized holding gains and losses should be reported for debt investments classified as trading, available-for-sale, and held-to-maturity.

> What is a performance obligation? Under what conditions does a performance obligation exist?

> On July 1, 2017, Roberts Corporation issued $3,000,000 of 9% bonds payable in 20 years. The bonds include detachable warrants giving the bondholder the right to purchase for $30 one share of $1 par value common stock at any time during the next 10 years.

> Explain the importance of a contract in the revenue recognition process.

> When is revenue recognized in the following situations? a. Revenue from selling products, b. revenue from services performed, c. revenue from permitting others to use company assets, and d. revenue from disposing of assets other than products.

> Stengel Co. enters into a 3-year contract to perform maintenance service for Laplante Inc. Laplante promises to pay $100,000 at the beginning of each year (the standalone selling price of the service at contract inception is $100,000 per year). At the en

> Describe the critical factor in evaluating whether a performance obligation is satisfied.

> Cardinal Paz Corp. carries an account in its general ledger called Investments, which contained debits for investment purchases, and no credits, with the following descriptions. Instructions (Round all computations to the nearest dollar.) a. Prepare

> On January 1, 2017, Novotna Company purchased $400,000, 8% bonds of Aguirre Co. for $369,114. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2022. Novotna Company u

> Presented below is an amortization schedule related to Spangler Companyâs 5-year, $100,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2015, for $108,660. The following schedule presents a comparison of the

> Hobbs Co. has the following defined benefit pension plan balances on January 1, 2017. Projected benefit obligationâ¦â¦â¦â¦.$4,600,000 Fair value of plan assetsâ&brvba

> Lemke Company sponsors a defined benefit pension plan for its employees. The following data relate to the operation of the plan for the years 2017 and 2018. Instructions a. Prepare a pension worksheet presenting both years 2017 and 2018 and accompanyi

> Aykroyd Inc. has sponsored a noncontributory, defined benefit pension plan for its employees since 1994. Prior to 2017, cumulative net pension expense recognized equaled cumulative contributions to the plan. Other relevant information about the pension p

> Hiatt Toothpaste Company initiates a defined benefit pension plan for its 50 employees on January 1, 2017. The insurance company which administers the pension plan provided the following selected information for the years 2017, 2018, and 2019. / There

> Gottschalk Company sponsors a defined benefit plan for its 100 employees. On January 1, 2017, the company’s actuary provided the following information. Accumulated other comprehensive loss (PSC)………………………………….$150,000 Pension plan assets (fair value and m

> Jackson Company adopts acceptable accounting for its defined benefit pension plan on January 1, 2016, with the following beginning balances: plan assets $200,000; projected benefit obligation $250,000. Other data relating to 3 yearsâ op

> Nate Beggs signs a 1-year contract with BlueBox Video. The terms of the contract are that Nate is required to pay a nonrefundable initiation fee of $100. No annual membership fee is charged in the first year. After the first year, membership can be renew

> Briefly explain the conditions when a contract modification shall be accounted for as a separate performance obligation.

> Elton Co. has the following postretirement benefit plan balances on January 1, 2017. Accumulated postretirement benefit obligationâ¦â¦â¦$2,250,000 Fair value of plan assetsâ¦&aci

> Larson Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2018, the following balances related to this plan. Plan assets (market-related value)…….$270,000 Projected benefit obligation…………………340,000 Pension asset/liability……………

> The following data relate to the operation of Kramer Co.’s pension plan in 2018. The pension worksheet for 2017 is provided in P20-10. Service cost…………………………………………..$59,000 Actual return on plan assets……………………32,000 Amortization of prior service cost…………

> Wise Company began operations at the beginning of 2018. The following information pertains to this company. 1. Pretax financial income for 2018 is $100,000. 2. The tax rate enacted for 2018 and future years is 40%. 3. Differences between the 2018 inco

> The following information was disclosed during the audit of Elbert Inc. 1. Amount Due Year……………..per Tax Return 2017………………………$130,000 2018……………………….104,000 2. On January 1, 2017, equipment costing $600,000 is purchased. For financial

> Crosley Corp. sold an investment on an installment basis. The total gain of $60,000 was reported for financial reporting purposes in the period of sale. The company qualifies to use the installment-sales method for tax purposes. The installment period is

> Presented below are two independent situations related to future taxable and deductible amounts resulting from temporary differences existing at December 31, 2017. 1. Mooney Co. has developed the following schedule of future taxable and deductible amoun

> The accounting records of Shinault Inc. show the following data for 2017 (its first year of operations). 1. Life insurance expense on officers was $9,000. 2. Equipment was acquired in early January for $300,000. Straight-line depreciation over a 5-year

> The following information has been obtained for Gocker Corporation. 1. Prior to 2017, taxable income and pretax financial income were identical. 2. Pretax financial income is $1,700,000 in 2017 and $1,400,000 in 2018. 3. On January 1, 2017, equipment

> On May 1, 2017, Mount Company enters into a contract to transfer a product to Eric Company on September 30, 2017. It is agreed that Eric will pay the full price of $25,000 in advance on June 15, 2017. Eric pays on June 15, 2017, and Mount delivers the pr

> Presented below are two independent revenue arrangements for Colbert Company. Instructions Respond to the requirements related to each revenue arrangement. a. Colbert sells 3D printer systems. Recently, Colbert provided a special promotion of zero-int

> Martz Inc. has a customer loyalty program that rewards a customer with 1 customer loyalty point for every $10 of purchases. Each point is redeemable for a $3 discount on any future purchases. On July 2, 2017, customers purchase products for $300,000 (wit

> Hale Hardware takes pride as the “shop around the corner” that can compete with the big-box home improvement stores by providing good service from knowledgeable sales associates (many of whom are retired local handymen). Hale has developed the following

> Ritt Ranch & Farm is a distributor of ranch and farm equipment. Its products range from small tools, power equipment for trench-digging and fencing, grain dryers, and barn winches. Most products are sold direct via its company catalog and Internet site.

> Economy Appliance Co. manufactures low-price, nofrills appliances that are in great demand for rental units. Pricing and cost information on Economyâs main products are as follows. Customers can contract to purchase either individuall

> Grill Master Company sells total outdoor grilling solutions, providing gas and charcoal grills, accessories, and installation services for custom patio grilling stations. Instructions Respond to the requirements related to the following independent rev

> Refer to the Tablet Bundle A revenue arrangement in P18-1. In response to competitive pressure for Internet access for Tablet Bundle A, after 2 years of the 3-year contract, Tablet Tailors offers a modified contract and extension incentive. The extended

> Amigos Burrito Inc. sells franchises to independent operators throughout the northwestern part of the United States. The contract with the franchisee includes the following provisions. 1. The franchisee is charged an initial fee of $120,000. Of this amo

> On March 1, 2017, Pechstein Construction Company contracted to construct a factory building for Fabrik Manufacturing Inc. for a total contract price of $8,400,000. The building was completed by October 31, 2019. The annual contract costs incurred, estima

Question: Explain how to account for the impairment