Question: Hobbs Co. has the following defined benefit

> 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 how to account for the impairment of a held-to maturity debt security.

> 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 Company’s 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

> 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 years’ 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 obligation………$2,250,000 Fair value of plan assets…&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 Economy’s 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

> Tablet Tailors sells tablet PCs combined with Internet service, which permits the tablet to connect to the Internet anywhere and set up a Wi-Fi hot spot. It offers two bundles with the following terms. 1. Tablet Bundle A sells a tablet with 3 years of I

> Talarczyk Company sold 10,000 Super-Spreaders on December 31, 2017, at a total price of $1,000,000, with a warranty guarantee that the product was free of any defects. The cost of the spreaders sold is $550,000. The assurance warranties extend for a 2-ye

> On January 1, 2017, Acker Inc. had the following balance sheet. The accumulated other comprehensive income related to unrealized holding gains on available-for-sale debt securities. The fair value of Acker Inc.’s available-for-sale de

> On October 15, 2017, Oil Products Co. purchased 4,000 barrels of fuel oil with a cost of $240,000 ($60 per barrel). Oil Products is holding this inventory in anticipation of the winter 2018 heating season. Oil Products accounts for its inventory at the l

> LEW Jewelry Co. uses gold in the manufacture of its products. LEW anticipates that it will need to purchase 500 ounces of gold in October 2017, for jewelry that will be shipped for the holiday shopping season. However, if the price of gold increases, LEW

> Brooks Corp. is a medium-sized corporation specializing in quarrying stone for building construction. The company has long dominated the market, at one time achieving a 70% market penetration. During prosperous years, the company’s profits, coupled with

> Warren Co. purchased a put option on Echo common shares on January 7, 2017, for $360. The put option is for 400 shares, and the strike price is $85 (which equals the price of an Echo share on the purchase date). The option expires on July 31, 2017. The f

> Johnstone Co. purchased a put option on Ewing common shares on July 7, 2017, for $240. The put option is for 200 shares, and the strike price is $70. (The market price of a share of Ewing stock on that date is $70.) The option expires on January 31, 2018

> McElroy Company has the following portfolio of investment securities at September 30, 2017, its most recent reporting date. On October 10, 2017, the Horton shares were sold at a price of $54 per share. In addition, 3,000 shares of Patriot common stock

> Fernandez Corp. invested its excess cash in securities during 2017. As of December 31, 2017, the securities portfolio consisted of the following common stocks. Instructions a. What should be reported on Fernandez’s December 31, 2017,

> Presented below is information taken from a bond investment amortization schedule with related fair values provided. These bonds are classified as available-for-sale. Instructions a. Indicate whether the bonds were purchased at a discount or at a prem

> Christina Corporation is preparing the comparative financial statements to be included in the annual report to stockholders. Christina employs a fiscal year ending May 31. Income from operations before income taxes for Christina was $1,400,000 and $660,

> Leno Computers manufactures tablet computers for sale to retailers such as Fallon Electronics. Recently, Leno sold and delivered 200 tablet computers to Fallon for $20,000 on January 5, 2017. Fallon has agreed to pay for the 200 tablet computers within 3

> The information below pertains to Barkley Company for 2018. Net income for the year…………………………………$1,200,000 7% convertible bonds issued at par ($1,000 per bond); each bond is convertible into 30 shares of common stock…………………………………………..2,000,000 6% convert

> Charles Austin of the controller’s office of Thompson Corporation was given the assignment of determining the basic and diluted earnings per share values for the year ending December 31, 2018. Austin has compiled the information listed below. 1. The com

> Melton Corporation is preparing the comparative financial statements for the annual report to its shareholders for fiscal years ended May 31, 2017, and May 31, 2018. The income from operations for the fiscal year ended May 31, 2017, was $1,800,000 and in

> Amy Dyken, controller at Fitzgerald Pharmaceutical Industries, a public company, is currently preparing the calculation for basic and diluted earnings per share and the related disclosure for Fitzgerald’s financial statements. Below is

> Assume that Amazon.com has a stock-option plan for top management. Each stock option represents the right to purchase a share of Amazon $1 par value common stock in the future at a price equal to the fair value of the stock at the date of the grant. Amaz

> Angela Corporation issues 2,000 convertible bonds at January 1, 2016. The bonds have a 3-year life, and are issued at par with a face value of $1,000 per bond, giving total proceeds of $2,000,000. Interest is payable annually at 6%. Each bond is converti

> Linda Berstler Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan. Instructions a. Compute the actual return on the plan assets in 2017. b. Compute the amount

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

> Jack Kelly Company has grown rapidly since its founding in 2007. To instill loyalty in its employees, Kelly is contemplating establishment of a defined benefit plan. Kelly knows that lenders and potential investors will pay close attention to the impact

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

> At January 1, 2017, Hennein Company had plan assets of $280,000 and a projected benefit obligation of the same amount. During 2017, service cost was $27,500, the settlement rate was 10%, actual and expected return on plan assets were $25,000, contributio

> Kleckner Company started operations in 2013. Although it has grown steadily, the company reported accumulated operating losses of $450,000 in its first four years in business. In the most recent year (2017), Kleckner appears to have turned the corner and