College Accounting (Book Only): A Career Approach
13th Edition
ISBN: 9781337280570
Author: Scott, Cathy J.
Publisher: South-Western College Pub
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Chapter 12, Problem 2A
A music store sells new instruments. The store also sells used instruments for people who are willing to give the store part of the sales price. The sales of used instruments, called commissions, amount to about one-fourth of total sales. On the firm’s classified income statement under the Revenue heading are both New Instrument Sales and Sales Commissions. Comment on this practice.
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A music store sells new instruments. The store also sells used instruments for people who are willing to give the store part of the sales price. The sale of used instruments, called sales commissions, amount to about one-fourth [25%] of total income. On the firm’s classified income statement under the “Revenue” heading are both New Instrument Sales and Sales Commissions.
Do you agree with presentation of these in the Income Statement? Why or why not?
Provided below is a list of several companies' revenue recognition policies.
Revenue Recognition Policy
A The performance obligation is satisfied with the passage of time. Interest is earned with the passage of time. Each period, income is accrued on loans even if customers have not yet paid the interest.
B The performance obligation occurs when the customer takes the merchandise (for in-store sales) or when the goods are delivered (for online sales). The company estimates product returns and reports an allowance at time of sale.
C The performance obligation is fulfilled when the customer takes the completed equipment. Revenues for financial or insurance services are recognized when the services are provided.
D The performance obligation is satisfied as the company builds and completes projects for customers. Revenue is recognized for long-term construction contracts based on the percentage of completion.
E The performance obligation occurs when the customer takes delivery of the…
A large auto manufacturer sells large fleets of vehicles to auto rental companies, such as Budget and Hertz. Suppose Budget is negotiating with the auto manufacturer to purchase 1,000 vehicles. Fill in the short paragraph to explain to the auto manufacturer when the company should, and should not, record this sales revenue and the related expense for cost of goods sold. Mention the accounting principles that provide the basis for your explanation.
Let's decide how and when the manufacturer should recognize revenue.
The manufacturer should record sales revenue when the revenue is
(collected ,deferred, earned) by (agreeing to deliver, delivering, never delivering) automobiles to the auto rental companies. The manufacturer should not record any revenue (after, during, prior to) delivery of the vehicles to the auto rental companies because it hasn't (collected, deferred, earned)the revenue yet. The (expense recognition principle, historical cost principle, revenue principle)…
Chapter 12 Solutions
College Accounting (Book Only): A Career Approach
Ch. 12 - What is the term used for the profit on a sale...Ch. 12 - Which of the following is not an example of a...Ch. 12 - Prob. 3QYCh. 12 - What is the third entry of the closing procedure...Ch. 12 - What general journal entry is used to undo a...Ch. 12 - Prob. 1DQCh. 12 - What is the difference between the cost of goods...Ch. 12 - Prob. 3DQCh. 12 - Prob. 4DQCh. 12 - Prob. 5DQ
Ch. 12 - Explain the calculation of net sales and net...Ch. 12 - Prob. 7DQCh. 12 - What are the rules for recognizing whether an...Ch. 12 - Prob. 9DQCh. 12 - Calculate the missing items in the following:Ch. 12 - Using the following information, prepare the Cost...Ch. 12 - Identify each of the following items relating to...Ch. 12 - The Income Statement columns of the August 31...Ch. 12 - Prob. 5ECh. 12 - Prob. 6ECh. 12 - From the following T accounts, journalize the...Ch. 12 - From the following information, journalize the...Ch. 12 - A partial work sheet for The Fan Shop is presented...Ch. 12 - Prob. 2PACh. 12 - The following partial work sheet covers the...Ch. 12 - The following accounts appear in the ledger of...Ch. 12 - A partial work sheet for McKnight Music Store is...Ch. 12 - Here is the partial work sheet for Meyer Mountain...Ch. 12 - The following partial work sheet covers the...Ch. 12 - The following accounts appear in the ledger of...Ch. 12 - Costco is the largest chain of membership...Ch. 12 - A music store sells new instruments. The store...Ch. 12 - You are an owner/bookkeeper in a country whose...Ch. 12 - Prob. 4ACh. 12 - Prob. 5ACh. 12 - It is now August 31. You have journalized and...
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