Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 5, Problem 5.8E
Requirement – 1
To determine
Performance obligation:
Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.
Transaction price:
Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows:
- Variable amount of consideration and the restriction on its recognition.
- Rights for sales return
- Whether the seller is acting as a principle or an agent
- Time value of money
- Payments by the seller to the customer
Deferred revenues:
Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an
Rules of Debit and Credit:
Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
- Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
- Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.
To determine: The number of performance obligations exist in the contract.
Requirement – 2
To determine
To prepare: The
Requirement – 3
To determine
To prepare: The journal entry for M Computers.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
ter 6 Exercises
1
pok
int
i
int
9
ences
Exercise 6-19 (Algo) Long-term contract; revenue recognition over time and at a point in time [LO6-9]
Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,600,000. The project began in 2021 and
was completed in 2022. Data relating to the contract are summarized below:
Costs incurred during the year.
Estimated costs to complete as of 12/31
Billings during the year.
Cash collections during the year
Complete this question by entering your answers in the tabs below.
Required 1
Required:
1. Compute the amount of revenue and gross profit or loss to be recognized in 2021 and 2022 assuming Nortel recognizes revenue
over time according to percentage of completion.
2. Compute the amount of revenue and gross profit or loss to be recognized in 2021 and 2022 assuming this project does not qualify
for revenue recognition over time.
3. Prepare a partial balance sheet to show how the information related to this contract…
LO6-4,LO6-5
E 6-5 Performance obligations LO6–2,
On March 1, 2024, Gold Examiner receives $147,000 from a local bank and promises to deliver 100 units of certified l-oz. gold bars on a
future date. The contract states that ownership passes to the bank when Gold Examiner delivers the products to Brink's, a third-party
carrier. In addition, Gold Examiner has agreed to provide a replacement shipment at no additional cost if the product is lost in transit.
The stand-alone price of a gold bar is $1,440 per unit, and Gold Examiner estimates the stand-alone price of the replacement insurance
service to be $60 per unit. Brink's picked up the gold bars from Gold Examiner on March 30, and delivery to the bank occurred on April
1.
Required:
1. How many performance obligations are in this contract?
2. Prepare the journal entry Gold Examiner would record on March 1.
3. Prepare the journal entry Gold Examiner would record on March 30.
4. Prepare the journal entry Gold Examiner would record on April…
Problem 12
On January 1, GEN enters into a contract with LORD for the sale of a high-end security scanner for P630,000. The contract includes a put option the obliges GEN to repurchase the scanner machine from LORD for P567,000 on or before December 31. The market value is expected to be P495,000 on December 31. LORD pays GEN P630,000 on January 1. The transaction should be accounted for as a:
A. Sale C. No sale/lease
B. Lease D. Cannot be determined
Problem 13
Noreen INC a truck dealer, sells a truck on January 1, 2019, to Mendoza for P3,000,000. Noreen INC agrees to repurchase the truck on December 31, 2020 for P3,630,000.
1. Assuming a 10% is imputed in the agreement, how much is the liability of Tom Co on January 1, 2019?
A. 1,500,000 C. 3,000,000
B. 1,815,000 D. 3,630,000
2. Using the information above, what is the interest expense for 2019?
A. None C. 330,000
B. 300,000 D. 630,000
3. How much should NOREEN INC record interest and retirement of its liability to MENDOZA
INC…
Chapter 5 Solutions
Intermediate Accounting
Ch. 5 - What are the five key steps a company follows to...Ch. 5 - What indicators suggest that a performance...Ch. 5 - What criteria determine whether a company can...Ch. 5 - We recognize service revenue either at one point...Ch. 5 - What characteristics make a good or service a...Ch. 5 - Prob. 5.6QCh. 5 - What must a contract include for the contract to...Ch. 5 - How might the definition of probable affect...Ch. 5 - When a contract includes an option to buy...Ch. 5 - Prob. 5.10Q
Ch. 5 - Prob. 5.11QCh. 5 - Is a customers right to return merchandise a...Ch. 5 - Prob. 5.13QCh. 5 - Under what circumstances should sellers consider...Ch. 5 - When should a seller view a payment to its...Ch. 5 - What are three methods for estimating stand-alone...Ch. 5 - When is revenue recognized with respect to...Ch. 5 - In a franchise arrangement, what are a franchisors...Ch. 5 - When does a company typically recognize revenue...Ch. 5 - Prob. 5.20QCh. 5 - Prob. 5.21QCh. 5 - Prob. 5.22QCh. 5 - Must bad debt expense be reported on its own line...Ch. 5 - Explain the difference between contract assets,...Ch. 5 - Explain how to account for revenue on a long-term...Ch. 5 - Prob. 5.26QCh. 5 - Prob. 5.27QCh. 5 - What are the two general criteria that must be...Ch. 5 - Explain why, in most cases, a seller recognizes...Ch. 5 - Revenue recognition for most installment sales...Ch. 5 - Prob. 5.31QCh. 5 - How does a company report deferred gross profit...Ch. 5 - Prob. 5.33QCh. 5 - Briefly describe the guidelines for recognizing...Ch. 5 - Prob. 5.35QCh. 5 - Briefly describe the guidelines provided by GAAP...Ch. 5 - Revenue recognition at a point in time LO52 On...Ch. 5 - Timing of revenue recognition LO53 Estate...Ch. 5 - Prob. 5.3BECh. 5 - Allocating the transaction price LO54 Sarjit...Ch. 5 - Existence of a contract LO5-5 Tulane Tires wrote...Ch. 5 - Prob. 5.6BECh. 5 - Prob. 5.7BECh. 5 - Performance obligations; warranties LO55 Vroom...Ch. 5 - Prob. 5.9BECh. 5 - Prob. 5.10BECh. 5 - Performance obligations; construction LO55...Ch. 5 - Prob. 5.12BECh. 5 - Prob. 5.13BECh. 5 - Variable consideration LO56 Leo Consulting enters...Ch. 5 - Variable consideration LO56 In January 2018,...Ch. 5 - Prob. 5.16BECh. 5 - Prob. 5.17BECh. 5 - Payment s by the seller to the customer LO56...Ch. 5 - Estimating stand-alone selling prices: adjusted...Ch. 5 - Estimating stand-alone selling prices: expected...Ch. 5 - Estimating stand-alone selling prices; residual...Ch. 5 - Timing of revenue recognition; licenses LO57 Saar...Ch. 5 - Prob. 5.23BECh. 5 - Prob. 5.24BECh. 5 - Timing of revenue recognition; franchises LO57...Ch. 5 - Timing of revenue recognition; bill-and-hold LO57...Ch. 5 - Prob. 5.27BECh. 5 - Prob. 5.28BECh. 5 - Contract assets and contract liabilities LO58...Ch. 5 - Prob. 5.30BECh. 5 - Long-term contract; revenue recognition over time;...Ch. 5 - Prob. 5.32BECh. 5 - Long-term contract; revenue recognition upon...Ch. 5 - Long-term contract; revenue recognition; loss on...Ch. 5 - Installment sales method On July 1, 2018, Apache...Ch. 5 - Prob. 5.36BECh. 5 - Cost recovery method Refer to the situation...Ch. 5 - Prob. 5.38BECh. 5 - Prob. 5.39BECh. 5 - Revenue recognition; software contracts under IFRS...Ch. 5 - Prob. 5.41BECh. 5 - Prob. 5.1ECh. 5 - Prob. 5.2ECh. 5 - Allocating transaction price LO54 Video Planet...Ch. 5 - Prob. 5.4ECh. 5 - Prob. 5.5ECh. 5 - Prob. 5.6ECh. 5 - Prob. 5.7ECh. 5 - Prob. 5.8ECh. 5 - Prob. 5.9ECh. 5 - Variable considerationmost likely amount; change...Ch. 5 - Variable considerationexpected value; change in...Ch. 5 - Prob. 5.12ECh. 5 - Approaches for estimating stand-alone selling...Ch. 5 - FASB codification research LO56, LO57 Access the...Ch. 5 - Franchises; residual method LO56, LO57 Monitor...Ch. 5 - FASB codification research LO58 Access the FASB...Ch. 5 - Long-term contract; revenue recognition over time...Ch. 5 - Long-term contract; revenue recognition over time...Ch. 5 - Long-term contract; revenue recognition over time;...Ch. 5 - Long-term contract; revenue recognition upon...Ch. 5 - Income (loss) recognition; Long-term contract;...Ch. 5 - Long-term contract; revenue recognition over time;...Ch. 5 - Installment sales method Charter Corporation,...Ch. 5 - Installment sales method; journal entries [This is...Ch. 5 - Installment sales; alternative recognition methods...Ch. 5 - Journal entries; point of delivery, installment...Ch. 5 - Prob. 5.27ECh. 5 - Prob. 5.28ECh. 5 - Prob. 5.29ECh. 5 - Prob. 5.30ECh. 5 - Prob. 5.31ECh. 5 - Prob. 5.32ECh. 5 - Prob. 5.33ECh. 5 - Prob. 5.34ECh. 5 - Prob. 5.35ECh. 5 - Prob. 5.1PCh. 5 - Prob. 5.2PCh. 5 - Prob. 5.3PCh. 5 - Prob. 5.4PCh. 5 - Prob. 5.5PCh. 5 - Variable consideration; change of estimate LO53,...Ch. 5 - Prob. 5.7PCh. 5 - Prob. 5.8PCh. 5 - Prob. 5.9PCh. 5 - Long-term contract; revenue recognition over time ...Ch. 5 - Long-term contract; revenue recognition upon...Ch. 5 - Long-term contract; revenue recognized over time;...Ch. 5 - Long-term contract; revenue recognition over time...Ch. 5 - Income statement presentation; installment sales...Ch. 5 - Prob. 5.15PCh. 5 - Installment sales; alternative recognition methods...Ch. 5 - Installment sales and cost recovery methods...Ch. 5 - Prob. 5.18PCh. 5 - Franchise sales; installment sales method Olive...Ch. 5 - Prob. 5.1BYPCh. 5 - Judgment Case 52 Satisfaction of performance...Ch. 5 - Judgment Case 53 Satisfaction of performance...Ch. 5 - Prob. 5.4BYPCh. 5 - Prob. 5.5BYPCh. 5 - Prob. 5.6BYPCh. 5 - Prob. 5.8BYPCh. 5 - Prob. 5.9BYPCh. 5 - Prob. 5.10BYPCh. 5 - Prob. 5.11BYPCh. 5 - Prob. 5.12BYPCh. 5 - Prob. 5.13BYPCh. 5 - Prob. 5.14BYPCh. 5 - Prob. 5.15BYPCh. 5 - Prob. 5.16BYPCh. 5 - Prob. 5.19BYPCh. 5 - Prob. 1CCTC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- E 15-4 Sales-type lease; lessor; balance sheet and income statement effects • LO15-2 On June 30, 2021, Georgia-Atlantic, Inc. leased warehouse equipment from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment at June 30, 2021. Georgia-Atlantic's incremental borrowing rate is 10%, the same rate IC used to calculate lease payment amounts. IC purchased the equipment from Builders, Inc. at a cost of $3 million. Required: 1. What amount related to the lease would IC report in its balance sheet at December 31, 2021 (ignore taxes)? 2. What amount related to the lease would IC report in its income statement for the year ended December 31, 2021 (ignore taxes)?arrow_forwardXIV. Allocating the Transaction Price Ging Systems sold software to a customer for P80,000. As part of the contract, Ging provide "free" technical support over the next six months. Ging sells the same sodware w technical support for P70,000 and a stand-alone six-month technical support cont P30.000, so these products would sell for P100,000 it sold separately. Required: 1. Indicate the transaction price for each of these transactions and when revenue wi recognized. 2. Prepare Ging's journal entry to record the sale of the software.arrow_forwardIssue 4 Solar Plc sells their frequency counters to various customers. 1) In contract X with the customer, Solar promises to deliver 50 frequency counters for a total price of £300,000. There is also a clause about free repair and maintenance service within three years after purchase. 2) In contract Y with the customer, Solar promises to deliver 25 frequency counters for a total price of £150,000. The contract does not include any warranty promises. However, it is well-known that Solar has provided one-year free repair service in the past. One particular Product Z, one type of electric board, is sold with a six-month manufacturer's warranty. Solar Plc also offers customers the option to purchase an extended warranty on Product Z. Under the extended warranty, Solar Plc will repair products that become defective within 24 months from the date the manufacturer's warranty ends. Product Z is sold for £530 per unit. A customer can purchase Product Z plus the extended warranty at a combined…arrow_forward
- 2022 SP CSR342 Week 6 Assignment Assignment 1. A. John will purchase Equinox EV ($35,000). John's credit score (FICO® Score) is 750. Based on the credit score, John can get 60 months auto-loan from WL Land Bank with 4.0% APR. John will pay the down payment as much as $5,000. B. Smith will purchase Equinox EV ($35,000). Smith's credit score (FICO Score) is 625. Based on the credit score, Smith can get 60 months auto-loan from WL Land Bank with 6.5% APR. Smith will pay the down payment as much as $5,000. [1] Explain who will pay more and how much pay more [no word limit] Correct answer existed but close answer will be considered as good; file on Brightspace (Excel WorkSheet 6.8). To compare John and Smith's cases, utilize the exc Even if it is named as mortgage amortization table, the auto payment (amortization plan) is totally same. Your answer should be like "John will pay less/more than Smith $-- per a month."arrow_forwardModule4_Lease.pdf x 16 / 19 100% Problem 14-19 (IFRS) Liza Company is a car dealer. On January 1, 2020, the entity entered into a finance lease with a customer under which the customer would pay P200,000 on January 1 each year for 5 years, commencing in 2020. The cost of the car is P600,000 and the cash selling price was P750,000. The entity paid legal fees of P20,000 to a law firm in connection with the arrangement of the lease. What amount of gross profit on sale should be recognized for the year ended December 31, 2020? a. 150,000 b. 130,000 20,000 d. c.arrow_forwardExercise 6-6 (Algo) Performance obligations; customer option for additional goods or services; residual method [LO6-2, 6-4, 6-6] Clarks Inc., a shoe retailer, sells boots in different styles. In early November the company starts selling "SunBoots" to customers for $65 per pair. When a customer purchases a pair of SunBoots, Clarks also gives the customer a 30% discount coupon for any additional future purchases made in the next 30 days. Customers can't obtain the discount coupon otherwise. Clarks anticipates that approximately 20% of customers will utilize the coupon, and that on average those customers will purchase additional goods that normally sell for $100. Required: 1. How many performance obligations are in a contract to buy a pair of SunBoots? 2. Assume Clarks cannot estimate the standalone selling price of a pair of SunBoots sold without a coupon. Prepare a journal entry to record revenue for the sale of 1,000 pairs of SunBoots.arrow_forward
- Question 18 UniTel Co provides a bundled-service package to B. Mann for $4,200 upfront. The service package includes upfront advice, 'on-call' advice, and database access for a 1-year period. If each service was sold separately to B. Mann the fees would be: Up-front advice: $900 On-call advice: $1,800 Database access: $2,700 Using the relative fair value approach, what is the amount of revenue recognised in relation to the on-call advice is (rounded to the nearest whole dollar): $700 $1,400 $1,800 $2,100arrow_forward4G 10:21 A O N Z8 KB/s : 94 1. During 2019, Yamashita 10 points Company introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to peso sales are 4% within 12 months following sale and 6% in the second 12 months following the sale. The entity reported sales of P5,000,000 for 2019 and P6,000,000 for 2020. The actual expenditures incurred amounted to P150,000 for 2019 and P550,000 for 2020. QUESTION: What amount should be reported as warranty expense for 2019? * 500,000 200,000 250,000 300,000 2. Durina 2019. Yamashita 10 pointsarrow_forwardProblem 18-01 (Part Level Submission) Waterway Company sells tablet PCs combined with Internet service, which permits the tablet to connect to the Internet anywhere and set up a Wi-Fi hot spot. It offers two bundles with the following terms. 1. Waterway Bundle A sells a tablet with 3 years of Internet service. The price for the tablet and a 3-year Internet connection service contract is $505. The standalone selling price of the tablet is $263 (the cost to Waterway Company is $160). Waterway Company sells the Internet access service independently for an upfront payment of $296. On January 2, 2020, Waterway Company signed 100 contracts, receiving a total of $50,500 in cash. 2. Waterway Bundle B includes the tablet and Internet service plus a service plan for the tablet PC (for any repairs or upgrades to the tablet or the Internet connections) during the 3-year contract period. That product bundle sells for $607. Waterway Company provides the 3-year tablet service plan as a…arrow_forward
- Question 5 t yet anwered On Oct 1, 2015, Short company ordered some equipment from a supplier for 200,000 euros. Delivery and payment will occur on Nov 30, 2016. The spot rates on Oct 1 and Nov 30 are $1.50 and $1.30 tarked out of L00 If the company does not hedge the commitment, at what amount is the equipment recorded on Nov 307 Fag question O a $270,000 O b. $300,000 O. $260,000 O d. None of the abovearrow_forward31 PROBLEMS Problem 2-1 (IAA) Miracle Company manufacturers a product that is packaged and sold. A plate is offered to customers sending in three wrappers accompanied by a remittance of P10. of m Data with respect to the premium offer are summarized below. 2020 2021 3,600,000 390,000 5,000 4,200,000 580,000 9,000 Sales Purchase of premium, P50 per plate Number of plates distributed as premiums Estimated number of plates to be distributed in subsequent period Distribution cost P20 per plate 2,000 3,000 Required: Prepare journal entries that would be made in 2020 and 2021 to record sales, premium purchases and redemptions, and year-end adjustments.arrow_forwardQUESTION 3 A manufacturer sells his final product for R300 plus VAT (@15%) to a wholesaler. The wholesaler sells the product at a mark-up of 20% above cost to the manufacturer. If the retailer's mark-up on cost is 25%, the final consumer will pay.......(including VAT). OA. R414 O B. R517.50 O C. R450.00 O D. R360.00arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
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:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education