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. Variable consideration: Variable consideration refers to the uncertain transaction price that depends upon the outcome of future events. Contract: Contract is a written document that creates legal enforcement for buying and selling the property. It is committed by the parties to performing their obligation and enforcing their rights. 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 prepare: The journal entry to record revenue for the first four months of the contract.

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Answer 1

Question

Chapter 6, Problem 6.8P

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.

Variable consideration:

Variable consideration refers to the uncertain transaction price that depends upon the outcome of future events.

Contract:

Contract is a written document that creates legal enforcement for buying and selling the property. It is committed by the parties to performing their obligation and enforcing their rights.

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 prepare: The journal entry to record revenue for the first four months of the contract.

Requirement – 2

To determine

To prepare: The journal entry for recognized bonus of Company V.

Requirement – 3

To determine

To prepare: The journal entry to record the revenue each month for the second four months of the contract.

Requirement – 4

To determine

To prepare: The journal entry to record the bonus cash received.

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Problem 6.34 Tirade Owens, a professional athlete, currently has a contract that will pay him a large amount in the first year of his contract and smaller amounts thereafter. He and his agent have asked the team to restructure the contract. The team, though reluctant, obliged. Tirade and his agent came up with a counter offer. What are the present values of each of the contracts using a 14 percent discount rate? Year Current Contract Team's Offer Counter offer $7,418,672 $3,635,149 $4,822,137 2 $4,508,172 $4,733,581 $9,331,916 3 $2,672,364 $3,794,757 $3,580,968 4 $7,254,956 $15,598,155 $11,172,632 What is the present values of Current Contract using a 14 percent discount rate? (Round answer to 2 decimal places, e.g. 15.25.) Present value

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Answer 2

Question

Chapter 6, Problem 6.8P

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.

Variable consideration:

Variable consideration refers to the uncertain transaction price that depends upon the outcome of future events.

Contract:

Contract is a written document that creates legal enforcement for buying and selling the property. It is committed by the parties to performing their obligation and enforcing their rights.

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 prepare: The journal entry to record revenue for the first four months of the contract.

Requirement – 2

To determine

To prepare: The journal entry for recognized bonus of Company V.

Requirement – 3

To determine

To prepare: The journal entry to record the revenue each month for the second four months of the contract.

Requirement – 4

To determine

To prepare: The journal entry to record the bonus cash received.

Expert Solution & Answer

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See solution

Answer 3

Question

Chapter 6, Problem 6.8P

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.

Variable consideration:

Variable consideration refers to the uncertain transaction price that depends upon the outcome of future events.

Contract:

Contract is a written document that creates legal enforcement for buying and selling the property. It is committed by the parties to performing their obligation and enforcing their rights.

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 prepare: The journal entry to record revenue for the first four months of the contract.

Requirement – 2

To determine

To prepare: The journal entry for recognized bonus of Company V.

Requirement – 3

To determine

To prepare: The journal entry to record the revenue each month for the second four months of the contract.

Requirement – 4

To determine

To prepare: The journal entry to record the bonus cash received.

Expert Solution & Answer

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Answer 4

Question

Chapter 6, Problem 6.8P

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.

Variable consideration:

Variable consideration refers to the uncertain transaction price that depends upon the outcome of future events.

Contract:

Contract is a written document that creates legal enforcement for buying and selling the property. It is committed by the parties to performing their obligation and enforcing their rights.

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 prepare: The journal entry to record revenue for the first four months of the contract.

Requirement – 2

To determine

To prepare: The journal entry for recognized bonus of Company V.

Requirement – 3

To determine

To prepare: The journal entry to record the revenue each month for the second four months of the contract.

Requirement – 4

To determine

To prepare: The journal entry to record the bonus cash received.

Expert Solution & Answer

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Answer 5

Chapter 6, Problem 6.8P

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.

Variable consideration:

Variable consideration refers to the uncertain transaction price that depends upon the outcome of future events.

Contract:

Contract is a written document that creates legal enforcement for buying and selling the property. It is committed by the parties to performing their obligation and enforcing their rights.

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 prepare: The journal entry to record revenue for the first four months of the contract.

Requirement – 2

To determine

To prepare: The journal entry for recognized bonus of Company V.

Requirement – 3

To determine

To prepare: The journal entry to record the revenue each month for the second four months of the contract.

Requirement – 4

To determine

To prepare: The journal entry to record the bonus cash received.

Answer 6

Chapter 6, Problem 6.8P

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.

Variable consideration:

Variable consideration refers to the uncertain transaction price that depends upon the outcome of future events.

Contract:

Contract is a written document that creates legal enforcement for buying and selling the property. It is committed by the parties to performing their obligation and enforcing their rights.

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 prepare: The journal entry to record revenue for the first four months of the contract.

Answer 7

Chapter 6, Problem 6.8P

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.

Variable consideration:

Variable consideration refers to the uncertain transaction price that depends upon the outcome of future events.

Contract:

Contract is a written document that creates legal enforcement for buying and selling the property. It is committed by the parties to performing their obligation and enforcing their rights.

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 prepare: The journal entry to record revenue for the first four months of the contract.

Answer 8

Requirement – 2

To determine

To prepare: The journal entry for recognized bonus of Company V.

Answer 9

Requirement – 2

To determine

To prepare: The journal entry for recognized bonus of Company V.

Answer 10

Requirement – 3

To determine

To prepare: The journal entry to record the revenue each month for the second four months of the contract.

Answer 11

Requirement – 3

To determine

To prepare: The journal entry to record the revenue each month for the second four months of the contract.

Answer 12

Requirement – 4

To determine

To prepare: The journal entry to record the bonus cash received.

Answer 13

Requirement – 4

To determine

To prepare: The journal entry to record the bonus cash received.

Answer 14

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Answer 15

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Answer 16

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Answer 17

Ch. 6 - What are the five key steps a company follows to...Ch. 6 - What indicators suggest that a performance...Ch. 6 - What criteria determine whether a company can...Ch. 6 - We recognize service revenue either at one point...Ch. 6 - What characteristics make a good or service a...Ch. 6 - Prob. 6.6Q Ch. 6 - What must a contract include for the contract to...Ch. 6 - How might the definition of probable affect...Ch. 6 - When a contract includes an option to buy...Ch. 6 - Prob. 6.10Q

Solution Summary: The author explains the rules of debiting and crediting different accounts while they occur in business transactions.

To prepare: The journal entry for recognized bonus of Company V.

To prepare: The journal entry to record the revenue each month for the second four months of the contract.

To prepare: The journal entry to record the bonus cash received.

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Chapter 6 Solutions