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Lecture 5

Week 5 - Review Questions - Solutions.docx

23 Pages
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Department
Administrative Studies
Course Code
ADMS 3585
Professor
Lykke Dela Cour

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Description
Review QuestionsSolutionsweek 5EXERCISE 68 1520 minutesaInventoriable costs80 units shipped at cost of 25000 each2000000Freight5800Total inventoriable cost200580043 units on hand 4380 X 20058001078118bCalculation of consignors profitRevenue from consignment sales 37 X 335001239500Cost of goods sold 3780 X 2005800 927683Commission expense 6 X 123950074370Advertising expense3200Inspection costs4200Profit on consignment sales230047cRemittance of consigneeConsignment sales1239500LessCommission revenue74370Advertising 3200Inspection 420081770Remittance from consignee1157730PROBLEM 61a Earnings approach versus the contractbased approachUnder the earnings approach the concern is only about recognizing revenue from the sales contractThe contractbased approach is concerned about both the recognition of the sales contract and the related revenueUnder the contractbased approach the contracts with the customer are identified the separate performance obligations in the contract are identified the transaction price is determined and allocated and revenue is recognized when a performance obligation is satisfied Both methods require that the revenue be measurable and collectible before recognition can occur However under the contractbased approach measurability and collectibility are not considered specific recognition criteria measurement uncertainty is embedded in the calculation of the transaction price and customer credit risk is measured upon initial recognition of the revenue and recorded in a separate Provision account on the income statement
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