1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
julia-pushkina [17]
3 years ago
12

Panarin Company entered into two contracts on the same date with Hjalmarsson Corporation. Panarin has provided the following ana

lysis of price and cost for the contracts:
Contract A Contract B
Contract price $125,000 $80,000
Cost of related goods 70,000 55,000
Gross profit (loss) $55,000 $25,000

Hjalmarsson, the customer, may cancel both contracts if either of them is not fulfilled by Panarin in a timely manner. Stand-alone prices are typically $120,000 for the goods in Contract A and $80,000 for the goods in Contract B.
Required:
a. Should the two contracts be combined for purposes of applying the 5-step revenue recognition model?
b. What amount of revenue should Panarin associate with each of the contracts?
c. When should revenue be recognized on each of the contracts?
Business
1 answer:
Nookie1986 [14]3 years ago
7 0

Answer:

a. The 2 contracts should be combined.

b. $123,000 for Contract A

$82,000 for Contract B

c. Revenue should be recognized when control of goods has transferred to the customer.

Explanation:

Part a:

Answer: Yes. The 2 contracts should be combined.

Reasoning:

5-step revenue recognition model indicates identification of contracts with customer in the first step, identification of performance obligations of the contract in the second step, transaction price determination in the third step, allocation of transaction price to the performance obligations to the fourth step and recognition of revenue as the performance obligations in the fifth step. Therefore, two contracts should be combined.

Part b:

Calculate the amount of revenue should P associate with each of the contracts.

There are two performance obligations:

Goods from contract A ($120,000 + ($5000 x 60%)) = $123000

Goods from contract B ($80,000 + ($5000 x 40%)) = $82000

Reasoning: It is given that the stand-alone prices for Contract A is $120,000 and Contract B is $80,000. Contract price of Contract A is $125,000. Thus, the additional $5,000 should be split between the 2 contracts. Hence, the performance obligations for goods from contract A is $123,000 and goods from contract B is $82,000.

Part C:

Revenue should be recognized when control of goods has transferred to the customer.

Reasoning:

Performance obligation is satisfied when transfer the good or service to the customer. Recognize revenue when the performance obligation is satisfied is the fifth step of the 5-step revenue recognition model. Hence, revenue should be recognized when control of goods has transferred to the customer.

You might be interested in
Presented below are transactions related to Novak Corp.
bearhunter [10]

Answer:

1) December 3, 202x, merchandise sold on account to Sarasota Corp., credit terms 4/10, n/30, FOB shipping point.

Dr Accounts receivable 644,700

    Cr Sales revenue 644,700

Dr Cost of goods sold 363,600

    Cr Merchandise inventory 363,600

2) December 8, 202x, sales allowance granted to Sarasota Corp.

Dr Sales returns and allowances 27,400

    Cr Accounts receivable 27,400

Sales returns and allowances is a contra revenue account that decreases sales revenue.

3) December 13, 202x, invoice collected from Sarasota Corp.

Dr Cash 592,608

Dr Sales discounts 24,692

    Cr Accounts receivable 617,300

Sales discounts is another contra revenue account that decreases sales revenue.

6 0
3 years ago
Classifications on Balance SheetThe balance sheet contains the following major sections:Current assetsLong-term investmentsPrope
Shkiper50 [21]

Answer:

1. Cash ⇒ CURRENT ASSETS, NOT A CONTRA ACCOUNT

2. Bonds Payable (due in 8 years) ⇒ LONG TERM LIABILITY, NOT A CONTRA ACCOUNT

3. Machinery ⇒ FIXED ASSET, NOT A CONTRA ACCOUNT

4. Deficit ⇒ PART OF RETAINED EARNINGS, NOT A CONTRA ACCOUNT

5. Unexpired Insurance ⇒ GENERALLY CURRENT ASSET (AT LEAST THE PORTION OF PREPAID INSURANCE THAT COVERS THE NEXT 12 MONTHS), NOT A CONTRA ACCOUNT

6. Franchise (net) ⇒ INTANGIBLE ASSET, NOT A CONTRA ACCOUNT

7. Fund to Retire Preferred Stock ⇒ LONG TERM INVESTMENT, NOT A CONTRA ACCOUNT

8. Current Portion of Mortgage Payable ⇒ CURRENT LIABILITY, NOT A CONTRA ACCOUNT

9. Accumulated Depreciation ⇒ PART OF FIXED ASSETS, CONTRA ACCOUNT

10. Copyrights ⇒ INTANGIBLE ASSET, NOT A CONTRA ACCOUNT

11. Investment in Held-to-Maturity Bonds ⇒ LONG TERM INVESTMENT, NOT A CONTRA ACCOUNT

12. Allowance for Doubtful Accounts ⇒ PART OF CURRENT ASSETS, CONTRA ACCOUNT

13. Notes Receivable (due in 3 years) ⇒ LONG TERM INVESTMENT, NOT A CONTRA ACCOUNT

14. Property Taxes Payable ⇒ CURRENT LIABILITY, NOT A CONTRA ACCOUNT

15. Deferred Taxes Payable ⇒ LONG TERM LIABILITY, NOT A CONTRA ACCOUNT

16. Additional Paid-in Capital on Preferred Stock ⇒ CONTRIBUTED CAPITAL, NOT A CONTRA ACCOUNT

17. Premium on Bonds Payable (due in 8 years) ⇒ LONG TERM LIABILITY, IT IS AN ADJUNCT ACCOUNT NOT A CONTRA ACCOUNT

18. Work in Process ⇒ CURRENT ASSET, NOT A CONTRA ACCOUNT

19. Common Stock, $1 par ⇒ CONTRIBUTED CAPITAL, NOT A CONTRA ACCOUNT

20. Land ⇒ FIXED ASSET, NOT A CONTRA ACCOUNT

21. Treasury Stock (at cost) ⇒ CONTRIBUTED CAPITAL, CONTRA ACCOUNT

22. Unrealized Increase in Value of Available-for-Sale Securities ⇒ ACCUMULATED OTHER COMPREHENSIVE INCOME, NOT A CONTRA ACCOUNT

3 0
3 years ago
Narciso Corporation is preparing a bid for a special order that would require 880 liters of material R19S. The company already h
bija089 [108]

Answer:

$5,456

Explanation:

A relevant cost can be defined as the cost that are said to be in form of a future cash cost that is relevant and important to a particular decision.

The relevant cost:

Current market cost 880 liters × Current market $6.20 per liter

= $5,456.

Therefore the relevant cost of the 880 liters of the raw material when deciding how much to bid on the special order will be $5,456

6 0
3 years ago
Indicate which barrier to entry appropriately explains why a monopoly exists in each scenario?
SpyIntel [72]
It should be b I hope that help
4 0
3 years ago
Each of the following is a main source of web traffic EXCEPT:
GalinKa [24]

Answer:

I think radio networks

Explanation:

why because i never heard them talk about that stuff on the radio sorry if it was wrong

4 0
3 years ago
Other questions:
  • Briefly discuss the purpose and role that each type of financial institutions (depositary, contractual, and investment) play in
    10·1 answer
  • AVI supplies vended food to a large university. Because students kick the machines at every opportunity, management has a consta
    14·1 answer
  • A bank is earning 6 percent on its $150 million in earning assets and is paying 4.75 percent on its liabilities. The bank's inte
    10·1 answer
  • Paul, age 37, participates in a Section 401(k) plan which allows employees to contribute up to 15 percent of their salary. His a
    11·1 answer
  • Crazy Delicious Inc. produces chocolate bars. The primary materials used in producing chocolate bars are cocoa, sugar, and milk.
    10·1 answer
  • Alex works as a customer service representative at an insurance company. Before starting his shift, Alex reviews issues from his
    5·2 answers
  • Selected accounts with amounts omitted are as follows: Work in Process Aug. 1 Balance 268,300 Aug. 31 Goods finished 168,800 31
    8·1 answer
  • Irish Corporation issued (sold) 15,000 shares of common stock for $65 per share. The bylaws established a stated value of $5 per
    13·1 answer
  • Mrs. Dill is planning on baking cakes for a summer festival. In order to do this, she needs to spend $15 on new equipment to bak
    12·1 answer
  • When Bonita put together a research report for her company, what would she have included in the references section?
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!