Revenue Recognition The highway department contracted with a private company to collect tolls and maintain facilities on a turnpike. Users of the turnpike can pay cash as they approach the toll booth, or they can purchase a pass. The pass is equipped with an electronic sensor that subtracts the toll fee from the pass balance as the motorist slowly approaches a special toll booth. The passes are issued in $10 increments. Refunds are available to motorists who do not use the pass balance, but they are issued very infrequently. Last year, $3,000,000 was collected at the traditional toll booths, $2,000,000 of passes were issued, and $1,700,000 of passes were used at the special toll booth. How much should the company recognize as revenue for the year? Explain how the revenue recognition rule should be applied in this case.

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Answer 1

Textbook Question

Chapter 4, Problem 4.1E

Revenue Recognition

The highway department contracted with a private company to collect tolls and maintain facilities on a turnpike. Users of the turnpike can pay cash as they approach the toll booth, or they can purchase a pass. The pass is equipped with an electronic sensor that subtracts the toll fee from the pass balance as the motorist slowly approaches a special toll booth. The passes are issued in $10 increments. Refunds are available to motorists who do not use the pass balance, but they are issued very infrequently. Last year, $3,000,000 was collected at the traditional toll booths, $2,000,000 of passes were issued, and $1,700,000 of passes were used at the special toll booth. How much should the company recognize as revenue for the year? Explain how the revenue recognition rule should be applied in this case.

Expert Solution & Answer

To determine

Concept Introduction:

Profit is calculated by reducing all the expenses from the total income of the company. All expenses include the cost of goods sold, administration expenses, selling expenses and some other expenses. Revenue is recorded when business earn it not when it recovers from customer.

To Explain: Amount of revenue and rule of revenue recognition.

Explanation of Solution

Company record revenue of $ 4700000 (3000000+1700000) and refund of $ 300000 (2000000-1700000) made to the customer against the passes not used. Revenue is recorded when it earns. So in this case all income received in cash is recorded as income and all passes that used on toll is also recorded as income but those passes which cannot be used is refunded to the customer.

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Revenue Recognition The highway department contracted with a private company to collect tolls and maintain facilities on a turnpike. Users of the turnpike can pay cash as they approach the toll booth, or they can purchase a pass. The pass is equipped with an electronic sensor that subtracts the toll fee from the pass balance as the motorist slowly approaches a special toll booth. The passes are issued in $10 increments. Refunds are available to motorists who do not use the pass balance, but they are issued very infrequently. Last year, $6,130,000 was collected at the traditional toll booths, $4,110,000 of passes were issued, and $3,490,000 of passes were used at the special toll booth. Which of the following statements shows the correct amount of revenue the company should recognize and reason why this is correct? Oa. Total revenue recognized would be $4,110,000 based on the passes issued during the year. Ob. Total revenue recognized would be $9,620,000 based on the total amount earned…

Record the entry for cash sales and it’s sales tax Record the cost of merchandise Record the sending of sales taxes to the government Record the sale of advance tickets

TRANSACTIONS (for year 20X1) June 1 Issued Check 4121 for $1,900 to pay the monthly rent. 2 Issued Check 4122 for $3,600 to remit the state sales tax. 3 Issued Check 4123 for $2,720 to Perfect Timing Watch Company, a creditor, in payment of Invoice 6808, dated May 5.4 Issued Check 4124 for $150 to establish a petty cash fund. (After journalizing this transaction, be sure to enter it on the first line of the petty cash analysis sheet.) 5 Paid $24 from the petty cash fund for office supplies, Petty Cash Voucher 1. 7 Issued Check 4125 for $2,704 to Perry Corporation in payment of a $2,600 promissory note and interest of $104. 8 Paid $14 from the petty cash fund for postage stamps, Petty Cash Voucher 2.10 Issued Check 4126 for $588 to a customer as a cash refund for a defective watch that was returned; the original sale was made for cash. 12 Issued Check 4127 for $270 to pay the telephone bill. 14 Issued Check 4128 for $5,537 to International Jewelry Company, a creditor, in payment of…

Answer 2

Textbook Question

Chapter 4, Problem 4.1E

Revenue Recognition

The highway department contracted with a private company to collect tolls and maintain facilities on a turnpike. Users of the turnpike can pay cash as they approach the toll booth, or they can purchase a pass. The pass is equipped with an electronic sensor that subtracts the toll fee from the pass balance as the motorist slowly approaches a special toll booth. The passes are issued in $10 increments. Refunds are available to motorists who do not use the pass balance, but they are issued very infrequently. Last year, $3,000,000 was collected at the traditional toll booths, $2,000,000 of passes were issued, and $1,700,000 of passes were used at the special toll booth. How much should the company recognize as revenue for the year? Explain how the revenue recognition rule should be applied in this case.

Expert Solution & Answer

To determine

Concept Introduction:

Profit is calculated by reducing all the expenses from the total income of the company. All expenses include the cost of goods sold, administration expenses, selling expenses and some other expenses. Revenue is recorded when business earn it not when it recovers from customer.

To Explain: Amount of revenue and rule of revenue recognition.

Explanation of Solution

Company record revenue of $ 4700000 (3000000+1700000) and refund of $ 300000 (2000000-1700000) made to the customer against the passes not used. Revenue is recorded when it earns. So in this case all income received in cash is recorded as income and all passes that used on toll is also recorded as income but those passes which cannot be used is refunded to the customer.

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Answer 3

Textbook Question

Chapter 4, Problem 4.1E

Revenue Recognition

The highway department contracted with a private company to collect tolls and maintain facilities on a turnpike. Users of the turnpike can pay cash as they approach the toll booth, or they can purchase a pass. The pass is equipped with an electronic sensor that subtracts the toll fee from the pass balance as the motorist slowly approaches a special toll booth. The passes are issued in $10 increments. Refunds are available to motorists who do not use the pass balance, but they are issued very infrequently. Last year, $3,000,000 was collected at the traditional toll booths, $2,000,000 of passes were issued, and $1,700,000 of passes were used at the special toll booth. How much should the company recognize as revenue for the year? Explain how the revenue recognition rule should be applied in this case.

Expert Solution & Answer

To determine

Concept Introduction:

Profit is calculated by reducing all the expenses from the total income of the company. All expenses include the cost of goods sold, administration expenses, selling expenses and some other expenses. Revenue is recorded when business earn it not when it recovers from customer.

To Explain: Amount of revenue and rule of revenue recognition.

Explanation of Solution

Company record revenue of $ 4700000 (3000000+1700000) and refund of $ 300000 (2000000-1700000) made to the customer against the passes not used. Revenue is recorded when it earns. So in this case all income received in cash is recorded as income and all passes that used on toll is also recorded as income but those passes which cannot be used is refunded to the customer.

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Answer 4

Textbook Question

Chapter 4, Problem 4.1E

Revenue Recognition

The highway department contracted with a private company to collect tolls and maintain facilities on a turnpike. Users of the turnpike can pay cash as they approach the toll booth, or they can purchase a pass. The pass is equipped with an electronic sensor that subtracts the toll fee from the pass balance as the motorist slowly approaches a special toll booth. The passes are issued in $10 increments. Refunds are available to motorists who do not use the pass balance, but they are issued very infrequently. Last year, $3,000,000 was collected at the traditional toll booths, $2,000,000 of passes were issued, and $1,700,000 of passes were used at the special toll booth. How much should the company recognize as revenue for the year? Explain how the revenue recognition rule should be applied in this case.

Expert Solution & Answer

To determine

Concept Introduction:

Profit is calculated by reducing all the expenses from the total income of the company. All expenses include the cost of goods sold, administration expenses, selling expenses and some other expenses. Revenue is recorded when business earn it not when it recovers from customer.

To Explain: Amount of revenue and rule of revenue recognition.

Explanation of Solution

Company record revenue of $ 4700000 (3000000+1700000) and refund of $ 300000 (2000000-1700000) made to the customer against the passes not used. Revenue is recorded when it earns. So in this case all income received in cash is recorded as income and all passes that used on toll is also recorded as income but those passes which cannot be used is refunded to the customer.

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Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

To determine

Concept Introduction:

Profit is calculated by reducing all the expenses from the total income of the company. All expenses include the cost of goods sold, administration expenses, selling expenses and some other expenses. Revenue is recorded when business earn it not when it recovers from customer.

To Explain: Amount of revenue and rule of revenue recognition.

Explanation of Solution

Company record revenue of $ 4700000 (3000000+1700000) and refund of $ 300000 (2000000-1700000) made to the customer against the passes not used. Revenue is recorded when it earns. So in this case all income received in cash is recorded as income and all passes that used on toll is also recorded as income but those passes which cannot be used is refunded to the customer.

Answer 8

Expert Solution & Answer

To determine

Concept Introduction:

Profit is calculated by reducing all the expenses from the total income of the company. All expenses include the cost of goods sold, administration expenses, selling expenses and some other expenses. Revenue is recorded when business earn it not when it recovers from customer.

To Explain: Amount of revenue and rule of revenue recognition.

Explanation of Solution

Company record revenue of $ 4700000 (3000000+1700000) and refund of $ 300000 (2000000-1700000) made to the customer against the passes not used. Revenue is recorded when it earns. So in this case all income received in cash is recorded as income and all passes that used on toll is also recorded as income but those passes which cannot be used is refunded to the customer.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

To determine

Concept Introduction:

Profit is calculated by reducing all the expenses from the total income of the company. All expenses include the cost of goods sold, administration expenses, selling expenses and some other expenses. Revenue is recorded when business earn it not when it recovers from customer.

To Explain: Amount of revenue and rule of revenue recognition.

Answer 12

Explanation of Solution

Company record revenue of $ 4700000 (3000000+1700000) and refund of $ 300000 (2000000-1700000) made to the customer against the passes not used. Revenue is recorded when it earns. So in this case all income received in cash is recorded as income and all passes that used on toll is also recorded as income but those passes which cannot be used is refunded to the customer.

Answer 13

Ch. 4 - Revenue Recognition The highway department...Ch. 4 - Prob. 4.2.1E Ch. 4 - Prob. 4.2.2E Ch. 4 - Prob. 4.2.3E Ch. 4 - Prob. 4.3E Ch. 4 - Prob. 4.4E Ch. 4 - Prob. 4.5E Ch. 4 - Prob. 4.6.1E Ch. 4 - Prob. 4.6.2E Ch. 4 - Prob. 4.6.3E

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