Orange Music purchased the rights to all Fixing Benjamin's music on January 1st, 2022, for $1 million cash. On December 31st, 2022, a change in consumer tastes over the year led to the determination that future sales of Fixing Benjamin’s discography would be significantly lower than expected. One accountant estimated that music sales for the years 2023, 2024, and 2025 would be $300,000, $200,000, and $100,000, respectively, and mentioned that the appropriate discount rate for Orange Music is 7%. Record all journal entries of Orange Music for the year 2022.

Orange Music purchased the rights to all Fixing Benjamin's music on January 1st, 2022, for $1 million cash. On December 31st, 2022, a change in consumer tastes over the year led to the determination that future sales of Fixing Benjamin’s discography would be significantly lower than expected. One accountant estimated that music sales for the years 2023, 2024, and 2025 would be $300,000, $200,000, and $100,000, respectively, and mentioned that the appropriate discount rate for Orange Music is 7%. Record all journal entries of Orange Music for the year 2022.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 6MC

See similar textbooks

Similar questions

2Part BPTI Inc., located in a country which has a capital gains tax, conducted the followingtransactions:a. Purchased a building in February 2018 for $26,000,000. In March 2019, thecompany spent $2, 800,000 to install solar panels for electricity in the building. Thebuilding was sold for $40,000,000 in 2021. The annual maintenance cost was$500,000. The cost of advertising the sale of the building and the legal feesamounted to $1,200,000.b. A motor vehicle was purchased for $5 million on January 1, 2018. The vehicle wassold in 2021 for $4.5 million.c. Bought an antique painting for $3.5 million in 2019. The painting was sold in 2021for 1 million.d. Purchased a Government bond for $5,000,000.The company is entitled to Annual Exemption of $500,000. Capital losses as at 1 January2021 was $7,500,000.Required:Calculate the capital gains tax in 2021, assuming a capital gains tax of 20%
GoodBuy sells gift cards redeemable for GoodBuy products either in store or online. During 2024, GoodBuy sold $1,040,000 of gift cards, and $900,000 of the gift cards were redeemed for products. As of December 31, 2024, $33,000 of the remaining gift cards had passed the date at which GoodBuy concludes that the cards will never be redeemed. How much gift card revenue should GoodBuy recognize in 2024?
Cullumber Bakery began selling gift cards in 2025. Based on industry norms, they expect that 40% of the gift cards will not be redeemed. In 2025, the bakery sold gift cards with a value of $1000. During that period, gift cards with a value of $250 were redeemed. The amount of revenue that Cullumber will recognize in 2025 with regard to the gift cards is
During August 5, 2020, Hiro marketing sold an item worth P 500,000 for P 750,000. The required down payment was 20% of the price while the balance will be paid in 18 equal payments. The company’s policy is to repossess the item if the buyer fails 2 consecutive months. During January 2021, the item sold was repossessed. Required: Compute the RGP for the year 2020.
Accounting On January 1, 2021, X Company bought a machine for $44,000. It's now January 1, 2022, and management is disappointed that 2021 operating costs with the machine were $34,000. Since they are expecting future operating costs to continue to be $34,000 a year, they are considering replacing the machine with a new one. Although the new machine will cost $48,000, operating costs with the new machine will decrease by $9,000 each year. Both machines will last for 6 more years. The current machine can be sold immediately for $9,000 but will have no salvage value at the end of 6 years. The new machine will have a salvage value of $5,000 at the end of 6 years. Assuming a discount rate of 5%, what is the net present value of replacing the current machine with the new one?
Situation 2: Malcolm Limited acquired a truck to deliver and install its specialized products at the customer's site. The vehicle's list price was $135,000, but customization added another $30,000 in costs. Malcolm took delivery of the truck on September 30, 2020, with a down payment of $15,000, signing a four-year, 8.0% note for the remainder, payable in equal payments of $43,488 beginning September 30, 2021. Malcolm expected the truck to be usable for 500 deliveries and installations. After that, the product's technology would have changed and made the vehicle obsolete. In late July 2023, the truck was destroyed when a concrete garage collapsed. Malcolm used the truck for 45 deliveries in 2020, 125 in 2021, 134 in 2022, and 79 in 2023. The company received a cheque for $12,000 from the insurance company and paid what remained on the note. Required #2: Prepare all entries that are needed to record the events and activities related to the truck, the note, and its interest, including…
On December 31, 2025, Novak Company acquired a computer from Plato Corporation by issuing a $548,000.00 zero-interest-bearing note, payable in full on December 31, 2029. Novak Company's credit rating permits it to borrow funds from its several lines of credit at 10%. The computer is expected to have a 5-year life and a $64,000 salvage value. Click here to view factor tables. (a) ✓ Your answer is correct. Prepare the journal entry for the purchase on December 31, 2025. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to 2 decimal places, e.g. 58,971.23. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.) (b) Date December 31, 2025 - eTextbook and Media List of Accounts Date December 31, 2026 Your answer is partially correct. December 31, 2026 Date…
6 Mama Mo Na Tita Ko Corporation, a manufacturer of cleaning products, is preparing annual financial statements at December 31, 2022. Because of a recently proven health hazard in one of its cleaning products, the government has clearly indicated its intention of having the company recall all cans of this paint sold in the last three months. The management estimates that this recall would cost P800,000. What accounting recognition, if any, should be accorded this situation? Statement 1: Recognize expense of P800,000 and liability of P5,800,000. Statement 2: Disclosed P800,000 as contingent liability in the notes to financial statement. Group of answer choices Only statement 2 is correct Only statement 1 is correct Both statements are correct Both statements are incorrect
On August 1, 2022, Mendez Corporation purchased a new machine on a deferred payment basis. A down payment of €2,000 was made and 4 annual installments of €6,000 each are to be made beginning on September 1, 2022. The cash equivalent price of the machine was €23,000. Due to an employee strike, Mendez could not install the machine immediately, and thus incurred €300 of storage costs. Costs of installation (excluding the storage costs) amounted to €800. The amount to be capitalized as the cost of the machine is :- €23,000. €23,800 €26,000. €24,100
Dowell Fishing Supply, Inc., sold $50,000 of Dowell Rods on December 15, 2021, to Bassadrome. Because of a shipping backlog, Dowell held the inventory in Dowell’s warehouse until January 12, 2022 (having assured Bassadrome that it would deliver sooner if necessary). How much revenue should Dowell recognize in 2021 for the sale to Bassadrome?
During 2025, Nash Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Nash for a lump sum of $35,910 because it is discontinuing manufacturing operations and wishes to dispose of its entire stock. Three types of chairs are included in the carload. The three types and the estimated selling price for each are listed below. Estimated Selling Type No. of Chairs Price Each Lounge chairs 240 $90 Armchairs 180 80 Straight chairs 420 50 During 2025, Nash sells 120 lounge chairs, 60 armchairs, and 72 straight chairs. (a) What is the amount of gross profit realized during 2025? (Round cost per chair to 2 decimal places, e.g. 78.25 and final answer to O decimal places, e.g. 5,845.) Gross profit realized during 2025 $ 1
Protection Company develops a patent on a new fingerprint security technology. On January 1, 2018, this patent is registered for a cost of $30,000,000 for a period of 10 years. The company does not expect this technology to be obsolete over at least the next 15 years and intends to use it over this period. At the end of 2020, the fair value of the patent is $15,000,000. The discounted value of future cash flows (value-in-use) is $16,000,000. The Company adopts the cost model. 1. What will the cost of patent be? 2. What will the useful life be? Justify your answer. 3. Prepare the entries for 2018, 2019 and 2020. Please show the workings. Dont provide handwritten or image based answers thank you