Revenues are normally recognized when the company transfers promised goods or services in the amount the company expects to be e

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3 years ago

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Revenues are normally recognized when the company transfers promised goods or services in the amount the company expects to be e

ntitled to receive. The amount recorded is the cash-equivalent sales price. Assume that the following transactions occurred in September:
a. A popular ski magazine company receives a total of $12,345 today from subscribers. The subscriptions begin in the next fiscal year. Answer from the magazine company's standpoint.
b. On September 1 of the current year, a bank lends $15,000 to a company, the note principal and $1,500 ($15,000 * 10 percent) annual interest are due in one year. Answer from the bank's standpoint.
c. Fucillo Automotive Group (offering a wide variety of car and truck brands) sells a Ford F-150 truck with a list, or "sticker," price of $34,050 for $32,000 cash.
d. Macy's department store orders 1,000 men's shirts for $16 each for future delivery from PVH Corp., manufacturer of IZOD ARROW, Van Heusen, Calvin Klein, and Tommy Hilfiger and other brand-name apparel. The terms require payment in full within 30 days of delivery. Answer from PVH Corp.'s standpoint.
e. PVH Corp. completes production of the shirts described in (c) and delivers the order. Answer from PVH's standpoint.
f. PVH Corp. receives payment from Macy's for the events described in (d) and (e). Answer from PVH's standpoint.
g. A customer purchases a ticket from American Airlines for $780 cash to travel the following January. Answer from American Airlines's standpoint.
h. Ford Motor Company issues $15 million in new common stock
i. Michigan State University receives $70,000,000 cash for 50,000 seven-game season football tickets to be played in the upcoming season.
j. Michigan State plays the first football game referred to in ()
k. Precision Builders signs a contract with a customer for the construction of a new $1,500,000 warehouse. At the signing, Precision receives a check for $200,000 as a deposit on the future construction. Answer from Precision's standpoint.
l. Best Buy receives inventory of 100 laptop computers from Dell; Best Buy promises to pay $96,000 within three months. Answer from Dell's standpoint.
m. Amazon.com delivers a $300 lamp to a customer who charges the purchase on his Amazon.com Store Card. Answer from Amazon's standpoint. Required: For each of the transactions, if revenue is to be recognized in September, indicate the revenue account title and amount. (If revenue is not recognized choose "None".)
Required: For each of the transactions, if revenue is to be recognized in September, indicate the revenue account title and amount. (If revenue is not recognized choose "None".)
Revenue Account Affected Amount of Revenue Earned in September
a None
b Interest revenue
c Sales revenue
d None
e Sales revenue
f None
g None
h None
i None
j Ticket Sales Revenue
k None
l Sales revenue
m Sales revenue

Business

1 answer:

iren [92.7K] · Answer 1 · 2021-11-23T08:11:23+03:00

Answer:

A. None

B. Interest revenue $1,500

C. Sales revenue $32,000

D. None

E. Sales revenue $16,000

F. None

G. None

H. None

I. None

J. Revenue tickets sales $10,000,000

K. None

L. $96,000

M. 300

Explanation:

Indication for the revenue account title and amount for each transaction

a. Since we were told that Subscription will begins in next fiscal this means that Revenue amount will be earned when subscription begins in the next fiscal year.

b. Annual interest = $1,500

Interest revenue earned in September = 1,500 / 12

Interest revenue earned in September = $125

c. Based on the information given the amount of Revenue to be recognized for cash equivalent sales value will be $32,000

d. Since we were told that PVH has just received the order in the month of September this means that no revenue can be recognized.

e. Revenue to be recognized = 1,000 * $16

Revenue to be recognized = $16,000

f. Bssed on the information given the revenue amount has already been recognized when the order made is satisfied.

g. Based on the information given the payment that was made is for travel in January which means that revenue is to be recognized only when travel takes place. Hence, No revenue will be recognized in September.

h. Based on the information given the Issue of common stock will not be a sales transaction.

i. Based on the information given the amount of Cash received in the month of September is Únearned revenue reason been that revenue will be recognized l when football game is been played.

j. Based on the information given out of 7 games, first game is played, which means that the Revenue amount to be recognized will be :

Revenue= 70,000,000/ 7

Revenue = $10,000,000

k. Based on the information advance amount for future construction was received which is 'Unearned Revenue' therefore No revenue is earned yet.

l. Since It is sales on account the evenue to be recognized will be the amount of $96,000

m. Revenue to be recognized will be the amount of $300 because payment was made through credit card

Therefore the summary of Revenue account affected and Amount of Revenue earned in September is :

Revenue account affected; Amount of Revenue earned in September