Ankiel Securities Division The Ankiel Securities Division works through manufact

Question

Ankiel Securities Division The Ankiel Securities Division works through manufacturers' agents in various cities. Orders for alarm systems and down payments are forwarded from agents, and the division ships the goods f.o.b. factory directly to customers (usually police departments and security guard companies). Customers are billed directly for the balance due plus actual shipping costs. The company received orders for $6,340,000 of goods during the fiscal year ended November 30, 2014. Down payments of $634,000 were received, and $5,400,000 of goods were billed and shipped. Actual freight costs of $96,000 were also billed. Commissions of 10% on product price are paid to manufacturing agents after goods are shipped to customers. Such goods are warranted for 90 days after shipment, and warranty returns have been about 1% of sales. Revenue is recognized at the point of sale by this division. Depp Advisory Division The Depp Advisory Division provides asset management services. This division grew out of Van Hatten's own treasury and asset management operations that several of its customers asked to have access to. On January 1, 2014, Depp entered into a contract with Scutaro Co. to perform asset management services for 1 year. Depp receives a quarterly management fee of 0.25% of Scutaro's assets under management at the end of each quarter. In addition, Depp receives a performance-based incentive fee of 20% of the fund's annual return in excess of the return of the S&P; 500 index at the end of the quarter (multiplied by the assets under management at quarter-end). At the end of the first quarter of 2014, Depp was managing $2,400,000 of Scutaro assets. The annualized return on the portfolio was 6.2% (the S&P; 500 index had an annualized return of 5.7%). Compute the revenue to be recognized in fiscal year 2014 for each of the three operating divisions of Van Hatten in accordance with generally accepted accounting principles.

Explanation / Answer

DEEP ADVISORY DIVISON

QUATERLY MANAGEMENT FEES ($2400000 * 0.25%) = $6000

PERFORMANCE BASED INCENTIVE 20%[$2400000 * (6.2% - 5.7%) * 1/4] = $600

TOTAL REVENUE FOR 1ST QUARTER OF FISCAL YEAR 2014 = $6600

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