GA Revenue Recognition Spring 23(1)

Allocating Transaction Price to Performance Obligations and Recording Sales Value Dealership Inc. markets and sells the vehicles to retail customers. Along with a new vehicle purchase, a customer will receive a free annual maintenance contract for one year from the date of purchase. The standalone selling price of a vehicle is $30,000 and the standalone selling price for the annual maintenance contract is $400. During October 2020, Value Dealership Inc. sold 30 vehicles for $30,250 per vehicle, each with a free annual maintenance contract. When answering the following questions: Round each allocated transaction price to the nearest dollar. If a journal entry (or a line of the journal entry) isn't required for the transaction, select "N/A" as the account name and leave the Dr. and Cr. answers blank (zero). a. Ignoring the cost entries, record the journal entry in October 2020 for Value Dealership’s sale of vehicles with the associated maintenance contracts to customers.…

HELP ME

Computing Revenue and Gross Profit on Long-term Construction Contract Supplier Corp. enters into a government contract in 2020 to provide computer equipment for $2 million. The contract consists of a single performance obligation to provide specified equipment in three years. Total costs estimated by Supplier Corp. for the contract are $1.4 million. The equipment is highly specialized and has no alternative uses. As negotiated in the contract, any costs incurred by Supplier Corp. plus a specified profit margin will be paid to Supplier Corp. in the event of a contract cancellation. Actual costs incurred in 2020 were $650,000 including unexpected cost overruns of $80,000 due to labor inefficiencies. At the end of 2021, the estimate of total costs has increased to $1.50 million due to an increase in cost of materials. Actual costs incurred to date are $1,150,000, excluding year one inefficiencies. a. Calculate (1) recognized revenue, (2) the gross profit, and (3) adjusted contract margin…

Question 12 An entity sells equipment service contracts that cover a two year period. The sale price of each contract is P800. The entity sold 1000 contracts evenly throughout 2019. The past experience is that, of the total pesos spent for the repairs on service contracts, 40% is incurred evenly during the first contract year and 60% evenly during the second contract year. What is the contract revenue for 2019?

On Jan. 1, 2020, ABC Corporation entered into a franchise agreement with a P570,000 cash payment as initial franchise fee. The fee covers the initial services with the following stand- alone prices. Location identification Market Study P 150,000 Manager Training 200,000 P 50,000 Employee Training ABC charges a mark-up on cost of 25% when it computes the stand-alone prices of all its services. On Jan 31, 2020, ABC has completed the location identification and market study. How much is the gross profit from the franchise to be reported in the income statement for January 2020? 200,000

PROBLEM 1 SE-HOON COMPANY sells equipment service contracts that cover a two-year period. The sale price of each contract is P600. The past experience is that, of the total pesos spent for repairs on service contracts, 40% is incurred evenly during the first contract year and 60% evenly during the second contract year. The entity sold 1,000 contracts evenly throughout 2019. 1. What is the contract revenue for 2019? a. 120,000 b. 240,000 c. 300,000 d. 150,000 2. What amount should be reported as deferred service revenue on December 31, 2019? a. 540,000 b. 480,000 c. 360,000 d. 300,000 3. What is the contract revenue for 2020? a. 180,000 b. 360,000 c. 300,000 d. 120,000 4. What is the contract revenue for 2021? a. 240,000 b. 360,000 c. 180,000 d. 0

Recognition of Service Contract Revenue Zac Murphy is president of Blooming Colours Ltd., which provides landscaping services in Leamington, Ontario. On November 20, 2022, Murphy signed a service contract with Eastern University. Under the contract, Blooming Colours will provide landscaping services for all of Eastern's buildings for a period of two years, beginning on January 1, 2023, and Eastern will pay Blooming Colours on a monthly basis, beginning on January 31, 2023. Although the same amount of landscaping services will be rendered in every month, the contract provides for higher monthly payments in the first year. Initially, Murphy proposed that the revenue from the contract be recognized in 2022. However, his accountant, Sue Storm, convinced him that this would be inappropriate. Then Murphy proposed that the revenue be recognized in an amount equal to the cash collected under the contract in 2022. Again, Storm argued against his proposal, saying that ASPE requires recognition…

Allee Corp. is evaluating a revenue arrangement todetermine proper revenue recognition. The contract is forconstruction of 10 speedboats for a contract price of$400,000. The customer needs the boats in its showroomsby February 1, 2018, for the boat purchase season; thecustomer provides a bonus payment of $21,000 if allboats are delivered by the February 1 deadline. The bonusis reduced by $7,000 each week that the boats are deliveredafter the deadline until no bonus is paid if the boatsare delivered after February 15, 2018. Allee frequentlyincludes such bonus terms in it contracts and thus hasgood historical data for estimating the probabilities ofcompletion at different dates. It estimates an equal probability(25%) for each full delivery outcome. Assume thatAllee has limited experience with a construction projecton the same scale as the 10 speedboats. How does thisaffect the accounting for the variable consideration?

Allocating Transaction Price to Performance Obligations and Recording Sales On June 1, 2020, Forde Auto Manufacturer sells a 4-door sedan to a dealer for $102,000, which includes three years of maintenance. The standalone selling price of the vehicle is $102,000 and the standalone selling price of the maintenance contract is $6,800. In addition, Forde offered a $1,700 cash incentive (per vehicle purchased) to the dealer if the vehicle was purchased in the first week of June 2020. a. How should the transaction price be allocated among the performance obligation(s) for sales made in the first week of June?b. Prepare Forde’s journal entry to record the sale of vehicles for cash, assuming that dealers purchased 20 vehicles during the first week of June 2020. Ignore the cost of sales entries. Note: If a journal entry (or a line of the journal entry) isn't required for the transaction, select "N/A" as the account name and leave the Dr. and Cr. answers blank (zero).Note: Round each allocated…

Identifying Performance Obligations and Recording Revenue from Franchise Rights The Krispy Donuts franchise has agreements with 100 franchisees across the United States to operate bakeries. On January 1, 2020, Krispy Donuts grants a franchisee the right to operate a bakery in Minneapolis, Minnesota using the Krispy Donut’s brand name, recipe, and other business concepts for a price of $1,000,000. On January 1, 2020, the franchisee made a down payment to the franchisor of $100,000 and paid the remaining $900,000 upfront fee on March 31, 2020. In exchange for the $1,000,000 payment, the franchisee received franchise rights, which include benefits of a national advertising campaign over the ten-year period (starting on the contract date) to promote the brand name of Krispy Donuts. The payment also includes the purchase of kitchen equipment from the franchisor (fair value of $120,000), and upfront training and assistance in setting up the franchise (fair value of $40,000). The training…

Ongoing Service Contract Service Provider Company (SPC) and Customer A (CA) have recently began doing business together on a 48 month contract. The contract can be ended if either party is unsatisfied, as long as the parties are equal in terms of cash payments and services provided. Both companies follow GAAP and have a Dec 31 year end. Review the following activity in 2021 and 2022. Show your work on the PDF Upload. T accounts would be appropriate. 2021: SPC provides monthly services beginning October 1, $2,000 per month. You can assume these services are provided 021 for (earned) by SPC on an ongoing basis for this problem. * CA pays a $16,000 cash payment on October 1, 2021. A) How much revenue should SPC record from CA for the 2021? $ B) How much would SPC show as unearned revenue as of Dec 31, 2021. If none, write 0. $ C) How much I| Proctorio is sharing your screen. Dec 31, 2021 Stop sharing Hide tv MacBook Pro

n January 1, 2021, ABC enters into a contract to construct a building for a customer. ABC identifies its performance obligation to satisfied over time. ABC uses the input method based on costs to measure its progress on the contract. The contract price is P9M Information on the construction is provided below: 2021 2022 2023 a. Contract cost incurred per year 2,760,000 3,540,000 500,000 b. Billing per year 50% 25% 25% c. Collections on billings per year d. Estimated costs to complete (at each yr. end) 4,140,000700,000 90% 90% balance Note: Billings per year are stated as percentages of the contract price. The contract is non-cancellable. The collection on billings in 2021 and 2022 are net of 10% retention. "Retention" is an amount withheld by the contracted and payable to the contractor at the end of the contract when the project is completed and accepted. Requirements; a. Compute for the gross profits, 2021 2022 2023

Marle Construction enters into a contract with a customer to build a warehouse for $950,000 on March 31, 2021, with a performance bonus of $50,000 if the building is completed by July 31, 2021. The bonus is reduced by $10,000 each week that the completion is delayed. Marle commonly includes these completion bonuses in its contracts and based on prior experience, estimates the following completion outcomes:   Completed by                                     Probability July 31, 2021                                       65% August 7, 2021                                    25% August 14, 2021                                     5% August 21, 2021                                     5%   Using the probability weighted method, what will total revenue be? Using the most likely method, what will total revenue be?

Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,000,000. The project began in 2018 and was completed in 2019. Data relating to the contract are summarized below:2018 2019Costs incurred during the year $ 300,000 $ 1,575,000Estimated costs to complete as of 12/31 1,200,000 –0–Billings during the year 380,000 1,620,000Cash collections during the year 250,000 1,750,000Required:1. Compute the amount of revenue and gross profit or loss to be recognized in 2018 and 2019 assuming Nortelrecognizes revenue over time according to percentage of completion

Happy Citrus started selling franchise locations in April 2026. The franchisee pays continuing fees based on annual sales. The initial fee relates to finding a store location and training the franchisee at Happy Citrus' training facility over a 2-year period. Initial franchise fee Continuing franchise fees Franchise sold Franchisees' reported sales Fiscal 2026 Fiscal 2027 $85,000 $95,000 4% 5 $1,500,000 3% 3 $2,000,000 Required: a) Assume that management estimates that 40% of the value of services related to the initial fee is fulfilled in the first year of signing the franchise agreement. Provide the journal entries to record how Happy Citrus should record revenues relating to initial franchise fees in fiscal 2026 and in 2027. Ignore the time value of money. Please use Excel formula for your calculation.

Chicago Heights company has 2 year contract to construct a warehouse. The contract value is 2949 and the estimated total cost is 1156. During the next 2 years, the costs are incurred as follows and the project is completed by the end of second year.   Contract data   Year for the year 2019 for the year 2020   Cost incurred 867$ 851$   Required Make the recognition of revenue, expenses and profits for 2020. Type in the profit value without using the currency sign and separators.

Engelhart Implements Inc. sells tractors to area farmers. The price for each tractor includes GPS positioning service for 9 months (which facilitates field settings for planting and harvesting equipment). The GPS service is regularly sold on a standalone basis by Engelhart for a monthly fee. After the 9-month period, the consumer can renew the service on a fee basis How many performance obligations exist in this contract? Select one: а. More than three performances O b. Three performances C. One performance d. Two performances O O D |l>

Recording Revenue Under a Contract Modification Traders Inc. enters into a three-year office maintenance contract with its customer for $252,000 ($84,000 per year). $84,000 per year is the standalone selling price for one year of maintenance service. At the end of the second year, both parties agree to modify the maintenance contract as follows: (1) the fee for the third year is reduced to $66,000, and (2) the contract is extended for an additional two years for $120,000 ($60,000 per year). The standalone selling price for one year of service at the time of modification is $72,000. Maintenance fees are billed annually by Traders Inc. a. Record Traders Inc.’s journal entry to recognize revenue for each of the first two years of the contract. Assume that the contract price was paid in cash. Account Name Dr. Cr. AnswerCashAccounts ReceivableDue from ConsigneeInventoryPrepaid ExpenseContract AssetPrepaid Advertising ExpenseAccounts PayableConsideration PayableDeferred RevenueSales…