Surfing the Standards Case 3: Time Shares
Treasure Island Corporation (TIC) sells time shares in luxury oceanfront cottages. During the year ended December 31, 2017, TIC completed a project consisting of 100 cottages in a particularly scenic portion of Hawaii. The project cost TIC $110 24 million. During the current year, TIC sold 1,924 weekly time shares in the cottages for $40,000 each.
TIC’s sales policy requires a 20% down payment, so TIC received $8,000 for each time share this year. Because TIC’s customers consist of only the most wealthy individuals, TIC does not anticipate any uncollectible accounts. Customers that purchased time shares will not make any more payments this year. TIC uses the full accrual method for revenue recognition purposes.
Prepare a memo for the file discussing how to account for this transaction. Include a discussion of what the account balances should be related to this transaction. (Ignore any interest on the amounts due from customers.) Support your conclusions using the Codification.
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Intermediate Accounting
- Grummet Company is acquiring a new wood lathe with a cash purchase price of $80,000. The Wood Master Industries (the manufacturer) has agreed to accept $23,500 at the end of each of the next 4 years. Based on this deal, how much interest will Grummet pay over the life of the loan? A. $94,000 B. $80,000 C. $23,500 D. $14,000arrow_forwardChicken Wings Inc. purchased a new camper’s bubble pool machine on an installment basis because based on Chicken’s financial analyst, it would be advantageous for the company to buy it in installment rather than for P3,256,500 in cash. Hence, Chicken Wings paid P835,000 as its down payment and the remaining will be paid as follows:Issuance of promissory note payable in 5 months – 334,000 per month Issuance of 16,700 ordinary shares with P35 par value And P50 fair value per share Bubble pool machine installation costs Chicken Wings a total amount of P250,500. This has been paid thru the company’s credit card. What is the initial cost of bubble pool machine?arrow_forward1. Danika Manufacturing purchased a patent from Clayton Industries on January 1, 2015, by paying $10,500 in cash and issuing a $35,000 noninterest-bearing note payable. The note called for six annual payments of $5,000 starting on December 31, 2015. The patent had a remaining legal life of 14 years. Danika expected that the patent would have a useful life of 15 years. Danika' borrowing rate was 6%. Danika uses the straight-line method to amortize intangibles. In 2019, Danika unsuccessfully sued a competitor for patent infringement. The company paid legal fees of $5,000 on June 30, 2019. What was the carrying value of the Patent at December 31, 2019? Assume no impairment adjustment is required. O A) $22,556 B) $29,250 O C) $28,987 O D) $22,293arrow_forward
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- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College