value: 4.00 points Revenues are normally recognized when the company transfers p
ID: 2569000 • Letter: V
Question
value: 4.00 points Revenues are normally recognized when the company transfers promised goods or services in the amount the company expects to receive The amount recorded is the cash-equivalent sales price. The following transactions occurred in September: a. A popular ski magazine company receives a total of $12,245 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 $1,800 to a company; the note principal and $216 ($1,800 × 12 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 $21,450 for $19,750 cash d. Macy's department store orders 1,040 men's shirts for $24 each for future delivery from PVH Corp., manufacturer of IZOD, ARROW Van Heusen, Calvin Klein, and Tommy Hilfiger 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 (d) 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 $700 cash to travel the following January. Answer from American Airlines's standpoint. h. Ford Motor Company issues $21.6 million in new common stock i. Michigan State University receives $19,210,000 cash for 79,000 five-game season football tickets j. Michigan State plays the first football game referred to in (i) k. Precision Builders signs a contract with a customer for the construction of a new $1,570,000 warehouse. At the signing, Precision receives a check for $208,000 as a deposit on the future construction. Answer from Precision's standpoint. I. A customer orders and receives 14 personal computers from Dell; the customer promises to pay $8,300 within three months. Answer from Dell's standpoint. m. Sears, a retail store, sells a $260 lamp to a customer who charges the sale on his Sear's credit card. Answer from Sears's standpoint. Required For each of the transactions, if revenue is to be recognized in September, indicate the revenue account title and amount. (lf revenue is not recognized choose "None". Round "Interest revenue" answer to 2 decimal places.) Revenue AccountAmount of Revenue Earned in Affected SeptemberExplanation / Answer
Answer:
Revenue account Affected
Amount of
Revenue
a
None
b
Interest revenue
18
c
Sales revenue
19750
d
None
e
Sales revenue
24960
f
None
g
None
h
None
I
None
j
Ticket Sales revenue
3842000
k
None
l
Sales revenue
8300
m
Sales revenue
260
Explanation to the answer:
a
No revenue earned in September, earning process is yet not complete
____________________________
b
=1800 *12% *1/12
=216*1/12
=18
________________________________
D
No transaction was occurred, there is exchange of promises only
________________________________
E
=1040*24
=$24960
Here revenue is recognized when goods are delivered
__________________________________
F
payment related to the revenue will be recorded previously in (e) above
____________________________
G
No revenue was earned in September and earning process is yet not complete
____________________________
H
No revenue was earned in September and the insurance of stock are financing activity
______________________________
I
No revenue was earned in September and earning process is yet not complete
_________________________________
J
=19,210,000/5
=3,842,000
Revenue account Affected
Amount of
Revenue
a
None
b
Interest revenue
18
c
Sales revenue
19750
d
None
e
Sales revenue
24960
f
None
g
None
h
None
I
None
j
Ticket Sales revenue
3842000
k
None
l
Sales revenue
8300
m
Sales revenue
260
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