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 adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned. 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 amount of recognized revenue of M Today newspaper.

Question

Want to see the full answer?

Answer 1

Question

Chapter 6, Problem 6.7E

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 adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned.

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 amount of recognized revenue of M Today newspaper.

Requirement (2)

To determine

The number of performance obligations exist in the contract.

Requirement (3)

To determine

To prepare: The journal entry for M Today.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Question 36 A company has daily purchases of $10,000 from its supplier. The supplier offers trade credit under the following terms: 3/20, net 50 days. The company finally chooses to pay on time (pay in the 50th day) but not to take the discount. We assume 365 days per year. What is the average level of the company’s free trade credit? ______ $30,000 $170,000 $200,000 $300,000 Question 37 Based on the information from Question 36, what is the average level of the company’s total trade credit? $170,000 $200,000 $300,000 $500,000 38 . Based on the information from Question 36, what is the average level of the company’s costly trade credit? $170,000 $200,000 $300,000 $500,000 Question 39 Based on the information from Question 36, what is the nominal annual cost of the firm’s costly trade credit? 28.6% 29.3% 33.5%…

eBook H Problem Walk-Through Receivables Investment Snider Industries sells on terms of 2/10, net 45. Total sales for the year are $500,000. Thirty percent of customers pay on the 10th day and take discounts; the other 70% pay, on average, 50 days after their purchases. Assume a 365-day year. a. What is the days sales outstanding? Do not round intermediate calculations. Round your answer to the nearest whole number. 38 days b. What is the average amount of receivables? Do not round intermediate calculations. Round your answer to the nearest dollar. $ $ 52055 c. What would happen to average receivables if Snider toughened its collection policy with the result that all nondiscount customers paid on the 45th day? Do not round intermediate calculations. Round your answer to the nearest dollar. 47206

P15–15 Cost of commercial paper Commercial paper is usually sold at a discount. Fan Corporation has just sold an issue of 90-day commercial paper with a face value of $1 million. The firm has received initial proceeds of $978,000. (Note: Assume a 365-day year.) What effective annual rate will the firm pay for financing with commercial paper, assuming it is rolled over every 90 days throughout the year? If a brokerage fee of $9,612 was paid from the initial proceeds to an investment banker for selling the issue, what effective annual rate will the firm pay, assuming the paper is rolled over every 90 days throughout the year?