Requirement – 1
Financial Accounting Standards Board (FASB):
FASB is an independent 7 member board, of accounting professionals overseeing the creation of financial statement. FASB standards are generally known as GAAP.
Variable consideration:
Variable consideration refers to the uncertain transaction price that depends upon the outcome of future events.
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.
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 discuss: The accounting for variable consideration arising from sales-based royalties on licenses of intellectual property, and when T can recognize the revenue for sales.
Requirement – 2
To prepare: The
Requirement – 3
To prepare: The journal entry to record revenue recognized on December 31, 2018.
Requirement – 4
To prepare: The journal entry to record deferred revenue on April, 1 and December 31, 2018.
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Intermediate Accounting
- 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…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_forwardE 10-9 Acquisition cost; noninterest-bearing note LO3 On January 1, 2013, Byner Company purchased a used tractor. Byner paid $5,000 down and signed a noninterest-bearing note requiring $25,000 to be paid on December 31, 2015. The fair value of the tractor is not determinable. An interest rate of 10% properly reflects the time value of money for this type of loan agreement. The company's financial year-end is December 31. Required: 1. Prepare the journal entry to record the acquisition of the tractor. Round computations to the nearest dollar. 2. How much interest expense will the company include in its 2013 and 2014 income statements for this note? 3. What is the amount of the liability the company will report in its 2013 and 2014 statements of financial position for this note?arrow_forward
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