AuctionCo.com sells used products collected from different suppliers. Assume a customer purchases a used bicycle through AuctionCo.com for $300. AuctionCo.com agrees to pay the supplier $200 for the bicycle. The bicycle
will be shipped to the customer by the original bicycle owner.
Required:
1. Assume AuctionCo.com takes control of this used bicycle before the sale and pays $200 to the supplier. Under
this assumption, how much revenue would AuctionCo.com recognize at the time of the sale to the customer?
2. Assume AuctionCo.com never takes control of this used bicycle before the sale. Instead, the bicycle is
shipped directly to the customer by the original bicycle owner, and then AuctionCo.com pays $200 to the
supplier. Under this assumption, how much revenue would AuctionCo.com recognize at the time of the sale
to the customer?
3. Assume AuctionCo.com promises to pay $200 to the supplier regardless of whether the bicycle is sold, but
the bicycle will continue to be shipped directly from the supplier to the customer. Under this assumption, how
much revenue would AuctionCo.com recognize at the time of the sale to the customer?
Trending nowThis is a popular solution!
Step by stepSolved in 3 steps
- On June 1, Entity A sold Product XX2 for P50,000 with a cost price of P30,000. Credit terms is 2/10, n/30. On June 15, P10,000 worth of Product XX2 was received due to wrong specifications. The buyer availed of the discount period and paid on June 10. What is the gross profit of Entity A for Product XX2?arrow_forwarddevarrow_forwardGeorge Moss, owner of Moss Interiors, is negotiating for the purchase of Oriole Galleries. The following balance sheet of Oriole is given in an abbreviated form as follows. Cash Land Assets Buildings (net) Equipment (net) Copyrights (net) Total assets 1. 2. $115,000 71,000 201,500 176,000 31,000 $594,500 Moss and Oriole agree that: Oriole Gallaries Balance Sheet As of December 31, 2025 Liabilities and Stockholders' Equity Accounts payable Notes payable (long-term) Total liabilities Common stock Retained earnings Total liabilities and stockholders' equity Land is undervalued by $28,000. Equipment is overvalued by $4,000. $212,400 24,800 $49,800 307,500 357,300 237,200 $594,500 Oriole agrees to sell the gallery to Moss for $381,000. Prepare the entry to record the purchase of Oriole Galleries on Moss's books. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for…arrow_forward
- Comfy Home sells gift cards which can be loaded with any amount greater than $10, in increments of $5. Which of the following statements best describes the nature of gift card sales? Gift cards represent an asset because the company is entitled to receive revenues from future sales that will be paid for with gift cards. Gift cards represent an asset because the company will get to keep the cash from all gift cards that expire before they are redeemed. O Gift cards represent a liability because the company has an obligation to provide goods to customers at a future date. Gift cards represent owners' equity because the company can recognize revenue as soon as the gift cards are sold.arrow_forwardOn April 5, a customer returns 16 bicycles with a sales price of $270 per bike to Barrio Bikes. Each bike cost Barrio Bikes $100. The customer had yet to pay on their account. The bikes are in sellable condition. Assume the perpetual and periodic methods are used. A. Prepare the journal entries to recognize this return if the company uses the perpetual inventory system. If an amount box does not require an entry, leave it blank. B. Prepare the journal entry to recognize this return if the company uses the periodic inventory system. If an amount box does not require an entry, leave it blank.arrow_forwardThe following are three independent situations. 1. Sandhill Rewards Inc. provides rewards services to licensees. Sandhill records service revenue related to rewards (granted as reward vouchers, which can be redeemed at a variety of retailers) and recognizes the cost of redemptions in the year vouchers are sold to licensees. Sandhill's past experience indicates that only 80% of the vouchers sold to licensees will be redeemed. Sandhill's liability for stamp redemptions was $12,693,900 at December 31, 2024. Additional information for 2025 is as follows. Service revenue from vouchers sold to licensees Cost of redemptions (vouchers sold prior to 1/1/25) $8,614,200 If all the vouchers sold in 2025 were presented for redemption in 2026, the redemption cost would be $5,173,300. What amount should Sandhill report as a liability for voucher redemptions at December 31, 2025? Liability for stamp redemptions at December 31, 2025 $ Consumer expiration date Total face amount of coupons issued Total…arrow_forward
- Sunland Downhill Bikes manufactures high quality custom mountain bikes which are sold to some of the best professional riders in the world. As its business continues to grow, it has agreed to purchase a competitor's business, Kusam Rides. Included in the terms of sale is a requirement for Sunland to maintain the accounts and notes payable of Kusam Rides. The carrying amounts and fair value of these identifiable assets and identifiable liabilities are: Inventory Equipment Buildings Accounts Payable Notes Payable Carrying Amount $40,600 121,800 348,000 Jan. 1 Fair Value $29,000 Date Account Titles and Explanation 121,800 406,000 (11,600) (11,600) (40,600) (40,600) $458,200 $504,600 The total carrying amount of $458,200 represents the net identifiable assets on Kusam Rides' financial statements. The total fair value of $504,600 represents the fair value of the net identifiable assets. Using the fair value information above, Sunland agreed to purchase the business for $580,000 on January…arrow_forwardeBay sells used products collected from different suppliers. Assume a customer purchases a used bicycle through eBay for $300. eBay agrees to pay the supplier $200 for the bicycle. The bicycle will be shipped to the customer by the original bicycle owner. Assume eBay promised to pay $200 to the supplier regardless of whether the bicycle is sold, but the bicycle will continue to be shipped directly from the supplier to the customer. How much revenue would eBay recognize at the time of the sale? Why?arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education