College Accounting (Book Only): A Career Approach
College Accounting (Book Only): A Career Approach
13th Edition
ISBN: 9781337280570
Author: Scott, Cathy J.
Publisher: South-Western College Pub
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Chapter 12, Problem 2A

A music store sells new instruments. The store also sells used instruments for people who are willing to give the store part of the sales price. The sales of used instruments, called commissions, amount to about one-fourth of total sales. On the firm’s classified income statement under the Revenue heading are both New Instrument Sales and Sales Commissions. Comment on this practice.

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A music store sells new instruments.  The store also sells used instruments for people who are willing to give the store part of the sales price.  The sale of used instruments, called sales commissions, amount to about one-fourth [25%] of total income.  On the firm’s classified income statement under the “Revenue” heading are both New Instrument Sales and Sales Commissions.  Do you agree with presentation of these in the Income Statement?  Why or why not?
(Accounting Treatment of Purchase Discounts) Shawnee Corp., a household appliances dealer, purchases its inventories from various suppliers. Shawnee has consistently stated its inventories at FIFO cost.InstructionsShawnee is considering alternate methods of accounting for the cash discounts it takes when paying its suppliers promptly. From a theoretical standpoint, discuss the acceptability of each of the following methods.(a) Financial income when payments are made.(b) Reduction of cost of goods sold for the period when payments are made.(c) Direct reduction of purchase cost.
According to ASC 606, how should a referral credit be recorded in your financial statement, as a reduction of revenue or as a marketing expense? Referral credit - Company ABC is giving their existing customers a $30 credit if they refer a New Customer (after this customer makes a purchase).

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College Accounting (Book Only): A Career Approach

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