Perfect Party Company contracts with a customer to provide its birthday party package, including a cake, balloons, and musical entertainment. In addition, Perfect Party will host the event. Perfect Party offers the musical entertainment only when it also hosts the party. It often sells cakes and balloons separately that it delivers before a party. Identify the separate performance obligations in this contract.
> Under the allowance method, will the actual write-off of an uncollectible account have a net effect on the financial statements? Explain.
> Do accountants typically measure accounts receivable by discounting them for the time value of money? Explain.
> How is cash held as a compensating balance reported on the balance sheet?
> Do companies always classify cash as a current asset on the balance sheet? Explain.
> Banks Corporation estimates its annual provision for uncollectible accounts by analyzing the aged schedule of accounts receivable. It is common industry practice to estimate an allowance for uncollectible accounts based on the following estimates Prepa
> Explain why a company must have highly effective internal controls over cash.
> What do firms use to record the sales value of a transaction when a note receivable has either an unreasonable rate of interest or no interest rate stated?
> Is the face value of a note receivable exchanged for goods and services always equal to the sales value of the transaction? Explain.
> What are cash equivalents?
> What qualitative disclosures do the standards require for revenue recognition?
> What selling practice do companies fraudulently use to accelerate revenue recognition?
> What method do agents in a transaction use to record sales?
> Can a firm record inventory out on consignment as revenue when transferred to the consignee? Explain.
> How does a firm estimate the degree completed under the percentage-of-completion approach?
> Are the percentage-of-completion and completed-contract methods both viable alternatives for a given contract? Explain.
> Using the information provided in BE9-12, prepare the journal entry to record the year-end adjusting entry for the bad debt expense assuming that Burl Brothers recovered $12,000 of the $51,000 write-offs during the year Data from BE9-12:
> Can firms recognize revenue prior to completion of a long-term contract? Explain
> When an entity does not meet the three criteria required to recognize revenue over time, it must determine when the goods and services are transferred to the customer. What are the indicators for determining transfer of control?
> What are the three criteria required to recognize revenue when goods and services are transferred over time?
> What are the two exceptions to the general rule that an entity should allocate the transaction price based on the relative standalone selling prices?
> What methods allocate the total transaction price to performance obligations?
> How does a seller account for any consideration paid to a customer?
> How does the computation of the financing component differ when delivery is before and after the payment?
> What factors should accountants consider to determine if there is a significant financing component in a contract?
> How does a constraint to variable consideration affect revenue recognition?
> Describe and contrast the two approaches used to estimate the amount of variable consideration in a contract.
> Burl Brothers provided the following information regarding its accounts receivable at the beginning of the current year: During the year, the company reported net credit sales of $21,000,000 of which it collected $9,900,000. The company wrote off $51,00
> What is variable consideration and what factors cause it?
> What is the transaction price in a contract? What factors determine the transaction price?
> What principles regarding timing and measurement determine when, and for how much, firms recognize revenue?
> What factors may indicate that a promise to deliver a good or service is not separate from other promises?
> What are the two criteria to define a good or service as distinct?
> How is a performance obligation defined?
> What is commercial substance?
> What are the five basic steps in revenue recognition?
> Megrew Building Company is developing a multi-unit residential building complex. Kit Collier enters into a binding sales contract with Megrew for a specified unit that is under construction. Each unit is of a similar size and has a similar floor plan, bu
> On April 7, 2020, McCool Systems signed a contract to develop and install a virtual private network (VPN) for Billy Majors Stores. The transaction price, including installation, is $580,000. The VPN consists of four components: regional offices, corporat
> Paul Anchor, Incorporated estimated that bad debt expense would equal 4% of the ending balance of accounts receivable for the current year. This year’s ending balance of accounts receivable amounted to $2,500,000. There was a $69,000 debit balance in the
> Casale Products Corporation manufactures and resurfaces bowling pins for commercial and residential use. On January 2 of the current year, Casale signs a contract with Closmeyer Lanes to be the exclusive supplier of pins for its lanes located throughout
> On September 1, 2019, Conboy Construction signed a contract with Venuti Enterprises to construct a new corporate headquarters and parking garage on land that Venuti owns. Conboy determines that control of the building is passed to Venuti as it is constru
> Moran Consulting currently provides tax services to Weiss Inc. Weiss engages Moran to advise it on the sale of one of its subsidiaries. Moran Consulting receives a nonrefundable, up-front retainer fee of $100,000. Moran is also entitled to a success fee
> IFRS. Repeat the requirements in P11-8 assuming that Greene Motors, Ltd. reports under IFRS. Assume that all the conditions to capitalize development costs have been met. Any development costs are amortized over 3 years. What is the difference between th
> Greene Motors, Ltd. recently entered the automobile industry by introducing its first fully electric vehicle, the Bolt. The Bolt is the first of many planned vehicles that Greene will produce. In order to expand its product line, Greene requires a state-
> The trial balance for the Dark Horse Company follows: Assume that MPL, Inc. offers to acquire Dark Horse at a purchase price of $650,000. A study of Dark Horse’s assets revealed that the inventory had a fair market value of $180,000 an
> l Information related to the long-term operating assets of Rivera Retail Distributors, Inc. at December 31, 2018, is as follows: The fiscal year-end of the company is December 31. The following events occurred during 2019: 1. On February 1, Rivera sold
> Jack Pinno, Vice President of Production at Greco Corporation, is considering changing the company’s capital acquisition and use policy. Greco’s policy has been to use equipment through its useful life and then to scra
> On January 1 of the current year, Minguss Manufacturing Company purchased a metal cutting and polishing machine at a cost of $4,000,000. The installation and delivery costs amounted to $250,000. The firm expects the machine to be productive for a total o
> Mund Manufacturing, Inc. started operations at the beginning of the current fiscal year. The following transactions took place during the year. Assume that the transactions are cash transactions unless indicated as a nonmonetary event. 1. Acquired land
> Paul Anchor, Incorporated estimated that bad debt expense would equal 4% of the ending balance of accounts receivable for the current year. This year’s ending balance of accounts receivable amounted to $2,500,000. There was a $69,000 credit balance in th
> On January 1, 2018, Union Power and Light commenced construction of a new generating plant to serve the northeast corridor of the state. The total cost of the project is $4,100,000, and it will be completed on June 1, 2019. Scheduled payments to contract
> IFRS. Repeat the requirements in P11-10 assuming that Hein Technologies reports under IFRS. Assume that all the conditions to capitalize development costs have been met. What is the difference between the research and development expense under U.S. GAAP
> Hein Technologies conducted the following cash transactions on January 1. 1. Paid $712,000 to fund internal research designed to develop a new digital scanner. The company expects the useful life to be 3 years. 2. Patented a product based on internal res
> Hoppie Products signed a contract with Coleman Manufacturing to design, develop, and produce a specialized plastic molding machine for its factory operations. The machine is not currently sold to the public. Hoppie issued a 3%, 8-year, $690,000 note paya
> O’Sullivan Corporation provided the following information regarding its ending inventory for the current year. O’Sullivan manufactures three types of athletic shoes. Selling costs are 10% of the selling price. The comp
> Framingdale Factories, Inc. manufactures low-cost furniture. The company produces three sizes of wardrobes 4 foot (S), 6 foot (M), and 8 foot (L). Framingdale provided the following data: Required: a. Determine the inventory carrying value with the lowe
> Silvio’s Taverns, Inc. adopted the dollar-value LIFO Method in 2015. Information related to Silvio’s inventory follows: Required: a. Compute Silvio’s ending inventory under the dollar-value LIFO meth
> The following information was provided by Capri Company: Capri adopted the dollar-value LIFO method using 2014 as the base year. Required: a. Compute Capri’s ending inventory under the dollar-value LIFO method for the years 2014 throu
> Nat’s Toy Stores Limited adopted the dollar-value LIFO inventory method using 2017 as the base year. The cumulative price index for 2018 through 2021 was 1.01, 1.03, 1.04 and 1.06, respectively. Ending inventory according to Natâ&
> The Happenings Company adopted the dollar-value LIFO inventory method on December 31, 2017, when the price index was 1.00. Ending inventory on the date that it adopted dollar-value LIFO follows. The cumulative price index for 2018 is 1.3385, and the cum
> Arc Company sells stone garden statues and offers a 6% discount to its high-volume customers. Sunny Garden Center purchased statues on account with a list price of $54,000 and received a volume discount of 6% of the purchase price. Give the journal entry
> The Outsider Company, Inc. provided the following information regarding its inventory for the year ended December 31, 2019. It made all of the purchases before it had any sales transactions for the year. Required: a. Compute the LIFO reserve at the begi
> Use the information provided in P10-1 for Morocco Imports. For each of the three cost-flow assumptions (moving-average, FIFO, and LIFO methods): Required: a. Prepare a partial income statement up to the cost of goods sold section. b. Compute the gross p
> The Wallace Weed Corporation provided the following data related to its inventory at the end of the current year: Required: a. What is Wallace Weed’s ending inventory and cost of goods sold under the conventional retail method? Round p
> The Tally Billiard Supply Corporation provided the following data related to its inventory at the end of the current year: What are Tally Corporation’s ending inventory and cost of goods sold under the conventional retail method? Round
> The Johnny Fruit Company provided the following data related to its inventory at the end of the current year. Round percentages to two decimal places. Required: a. What are Johnny Fruit’s ending inventory and cost of goods sold under t
> The Monte Sales Company provided the following data related to its inventory at the end of the current year. Round percentages to two decimal places. Required: a. What are Monte’s ending inventory and cost of goods sold under the conve
> In 2018, Sawyer Company experienced a major casualty loss. The roof of its ware house collapsed in an ice storm and destroyed its entire inventory. The company began the year with inventory of $598. It made purchases of $2,400 but returned $24 worth of m
> On January 1, 2017, Goodbye Electronics Outlets adopted the conventional retail method of accounting for its merchandise inventory. Determine the company’s ending inventory under the conventional retail method. (Round percentages to tw
> John Stevens Corporation uses the conventional retail method for financial reporting. The company’s inventory records are summarized here. Estimate John Stevens’ ending inventory using the conventional retail inventor
> Morocco Imports provided the following information regarding its inventory for the current year, its second year of operations. Compute Morocco’s ending inventory and cost of goods sold under each of the following cost-flow assumptions
> Round-up Garden Center established a $200 imprest petty cash fund at the beginning of the year. The fund custodian held the cash to be used to pay minor expenditures. During the year, the following expenditures were paid from the imprest petty cash fund
> Astro Carpets Incorporated provided the following accounts related to beginning balances in its accounts receivable and allowance accounts for the current year: Prepare the journal entries to record the following transactions that occurred during the cu
> Softa Company borrows $850,000 from Deer Financing Associates by securing a revolving line of credit at a 6% interest rate on April 15. Interest is due and payable at the end of each month based on the outstanding balance at the beginning of the month. S
> Council Company develops an aged schedule of accounts receivable at the end of each year. The company estimated an allowance for uncollectible accounts based on the following estimates: Council reported net credit sales of $20,000,000 for the current y
> Anche Company has organized its accounts receivable by customer and how long each receivable has been outstanding. Anche records bad debt expense based on an analysis of an aged schedule. The following information is as of the end of the year (December 3
> Cho Sportswear, Ltd. develops an aged schedule of accounts receivable at the end of each year. The company estimated an allowance for uncollectible accounts based on the following estimates: *The percentages are applied after a specific review of all
> Paulson Corporation provided the following account analyses for the current year: Required: Prepare the journal entry to record the bad debt provision at year-end assuming that Paulson estimates its uncollectible accounts at 5% of its ending accounts re
> The partial balance sheets of Williams Iron Works, Inc. follow: Additional Information: • Net credit sales for 2019 amounted to $9,350,000. • Cash collections for 2019 were $930,000. Required: a. Determine the amo
> Seramin Importers, Inc. sells coffee pots for $80 each. On November 12, the company sold 35 to a customer on account with terms of 1/15, n/30. The customer paid for 25 of the coffee pots on November 27 and paid for the remaining 10 on December 11. Requi
> Accounts receivable disclosures from Exhibit 9.8 in the text and the following information, answer the questions. Required: a. How is the carrying value of accounts receivable determined? b. What factors influence management’s judgmen
> Using the transactions listed in P9-9, prepare a partial balance sheet at December 31 and a partial income statement for the current year Data from P9-9:
> Gem Consulting established a $500 imprest petty cash fund at the beginning of the year. The fund custodian held the cash to be used to pay minor expenditures. During the year, the custodian paid the following expenditures from the petty cash fund: Meal
> Prepare the journal entries required to record the following transactions on the books of Sullivan Stamping Company (assume that the company uses the allowance method). Required: a. Writes off an account from Stewart Foods in the amount of $489,000. b.
> Pablo Products, Ltd. sells stuffed animals to local convenience stores and small pharmacy chains. All of Pablo’s sales are on consignment. The consignee receives a 15% commission for each product sold. Pablo completed the following cons
> Bernard Brothers Building (BBB) signed a contract for a fixed fee of $60,000 and used the completed-contract method to account for the contract. BBB provided the following information related to the contract. Required: a. Prepare the journal entries req
> Repeat the requirements of P8-9 assuming Wayne Computer Consultants uses the completed-contract method to report its long-term contracts. Data From P8-9:
> Wayne Computer Consultants, Incorporated develops and installs integrated computer systems and networks for large utilities. On January 2, 2018, the company signed a contract to deliver an electricity deployment system for a grid covering three New Engla
> Repeat the requirements of P8-7 assuming Bigelow Contractors uses the completed-contract method to report its long-term contracts. Additionally, compare the reported gross profit and net asset (liability) position reported under the percentage-of-complet
> Bigelow Contractors signed a contract to construct a storage facility for RGN Manufacturing, Inc. The fixed-fee contract specifies that the facility is to be completed in three years. Bigelow uses the percentage-of-completion method (cost-to-cost approac
> Nance Network Consultants, Incorporated uses the percentage-of completion method to account for its long-term contracts. It uses the cost-to-cost approach to measure progress. During the current year, Nance signed a contract to develop a computer network
> The transaction price must reflect the time value of money if: a. The vendor expects the period between customer payment and delivery of goods or services will be less than two years. b. The contract has a financing component that is significant to the c
> Telecom Co. enters into a two-year contract with a customer to provide wireless service (voice and data) for $40 per month. To induce customers, Telecom Co. provides a free phone. Telecom Co. normally sells the phone on a standalone basis for $200. Telec
> The following information pertains to Pewter Cup Company at August 30. Prepare the bank reconciliation for Pewter Cup by determining the correct balances for both book and bank. Prepare any required journal entries. 1. Cash balance per bank, $769 2. Au
> A performance obligation is: a. An enforceable promise in a contract with a customer to transfer a good or service to the customer. b. An offer to transfer a good or service to the customer. c. An expectation of a customer for the receipt of a good or se
> All of the following are elements of a contract except: a. The contract has commercial substance. b. The vendor can identify payment terms for the goods or services. c. It is not approved by both parties to the agreement. d. The vendor can identify each
> Pate paid $50,000 and gave a plot of undeveloped land with a carrying amount of $320,000 and a fair value of $450,000 to Bizzell Co. in exchange for a plot of undeveloped land with a fair value of $500,000. The land was carried on Bizzell’s books at $350
> Hi-Tech Corp. spent $300,000 on research and development to generate new product lines. Only one of the five product lines resulted in a patented item; the remaining four were considered unsuccessful. The cost of the product that was successfully patente
> Hi-Tech Corp. spent $300,000 on research and development to generate new product lines. Only one of the five product lines resulted in a patented item, and the remaining four were considered unsuccessful. Under U.S. GAAP, how much of the $300,000 should
> Holly Company incurred research and development costs in Year 1 as follows: The total research and development expense in Holly ’s Year 1 income statement under U.S. GAAP should be: a. $930,000 b. $870,000 c. $530,000 d. $470,000
> Visual Graphics Company sold a printing press for $74,000 on the last day of the reporting period. The printing press had a gross and net amount of $100,000 and $65,000, respectively, reflected on the balance sheet at that date. Which of the following is
