Xerox immediately recognized revenue from long-term leased contracts on copiers,

Question

Xerox immediately recognized revenue from long-term leased contracts on copiers, rather than recognizing it over the lease term. This is an example of:

a) conservative revenue recognition

b)the matching principle

c) period costing

d) aggressive revenue recognition

Mandalay Resorts had revenue of $2,462, income from continuing operation of $53, provision for income tax of $40, interest expense of $230, & depreciation & amortization of $216 (all in millions). Mandalay had EBIT (in millions) of:

a) -$217

b) $539

c)$1923

d)$323

Hilton had net income of $166 (in millions), unrealized gains/losses of -$9, foreign currency translation gains/losses of -$2 and interest expense of $590. Hilton had comprehensive income (in millions) of:

a)$155

b)$745

c)-$435

d)$177

Explanation / Answer

Dear student, only one question is allowed at a time. I am answering the first question

When risk and rewards have not fully been transferred but revenue is recognized despite all risks being transferred to the customer, this is called aggressive revenue recognition strategy

In the present situation, Xerox has not fully transferred all the risks of the copiers to the lessees as the lessees can anytime return the copiers as per the terms and conditions of contract term and realization of revenue is also pending for future years. So, this is clearly a case of aggressive revenue recognition and as per above discussion, option d is the correct option

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