ACC 332 Lecture 1: ACC Class Notes 3:7

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viridianjellyfish544

11 Feb 2019

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Created when sellers recognize revenue associated with a credit sale. Allowing people to buy on credit gives them the opportunity to buy more and buy quicker. The con for extending credit is the risk that customers won"t pay. Most companies provide credit to their customers r a 30-60 day period after the sale. Credit is classi ed as current assets because their normal collection period is part of the operating cycle of the business. 2% discount within 10 days, full amount/ due in 30 days. You give up the 2%, but you get the money. If you don"t give up the 2% and wait for the 30 day payment period, there is a risk that more than 2% will not be collected. 2% may not seem like a lot in a 30 day period, but if you annualize the number it adds up to a large percent.

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I believe Olin should consider to allow credit sales. Anadvantage would be is an increase in sales by offering to purchaseon credit. It also show that you respect your customers by trustingthem to pay for their purchases at a later time. Olin will gain therespect of his current customers while gaining new customers fromother competitors and creating competition.

There are some disadvantages to allowing credit sales. Cash flowwill be affected due to the delay in cash coming in according tothe credit terms. The cash that used to be available before willnot be there to pay bills. It's also just an overall huge risk totake. Customers credit history needs to be checked before takingthe risk. Even if the customer does have a good credit history itcan still lead to bad debts. If the collection agency isn't able toobtain the money then it is an expense to the business for theirpurchase. Accounts receivable will become a new account to fund.Accounts receivable will need to be calculated and updatedfrequently. If customers don't pay on time an invoice should besent out which will create more work.

Olin should make an estimate on how much revenue he willactually gain with the huge risk he is taking by allowing creditsales.

scarletmouse190

Anderson Accounting Services LLC provides accounting and tax preparation and consulting services. Sometimes customers only wish to have financial statements and/or tax returns prepared. Sometimes customers bundle accounting and tax preparation with consulting services (to be provided over a period of time). Sometimes customers only wish to have consulting services provided over a period of time. Because Anderson is a service firm there is no cost of goods sold associated with their services.

Customer is Civic Corporation	1
Tax consulting begins on November 1st and runs through the next April	11/1/X7
Date of contract	11/1/X7
Length of consulting services	6 months	months
Tax return preparation occurs over the period February through April of	20X8
Length of tax prepartion	3 months
Price of tax preparation to be allocated over the return preparation period	$ 2,000	stand alone price
Price of consulting services to be allocated over consulting period	$ 5,000	stand alone price
Customers are charged a lesser amount as follows for both tax and consulting	$ 6,000
Anderson Accounting Services LLC's current year end	12/31/X7
Customers pay at the contract date for BOTH the consulting and tax preparation services.

What are the performance obligations in the contract?

Tax preparation services

Tax preparation services and tax consulting services

Unable to determine

D.Tax consulting services

QUESTION 3

Determine the transaction price that should be allocated to the consulting services.

	A.	$4,286
	B.	$1,714
	C.	$1,429
	D.	$4,571

QUESTION 4

Calculate the total revenue that should be recognized in the current accounting period.

	A.	$4,571
	B.	$1,714
	C.	$1,429
		D. $4,286

QUESTION 5

What is the total amount in the deferred revenue account(s) at the end of the current accounting period?

	A.	$1,714
	B.	$4,571
	C.	$4,286
	D.	$1,429

QUESTION 6

What is the total amount of revenue that should be recognized in the NEXT accounting period period?

	A.	$1,714
	B.	$4,286
	C.	$1,429
	D.	$4,571

QUESTION 7

The following journal entry has what impact on the income statement?

Debit Cash XXX

Credit Deferred Revenue XXX

	A.	No impact
	B.	Decrease
	C.	Increase

QUESTION 8

The following journal entry has what impact on the income statement?

Debit Cash XXX

Credit Accounts Receivable XXX

	A.	No impact
	B.	Increase
	C.	Decrease

QUESTION 9

Revenue is defined as:

An inflow or other enhancements of assets of an entity or settlement of its liabilities (or a combination of both) during a period from delivering or producing goods, rendering services, or other activities that constitute the entityâs ongoing major or central operations.

Revenue is recognized from the settlement of which of the following liabilities:

	A.	Discount on Bonds Payable
	B.	Deferred Revenue
	C.	Salaries Payable
	D.	Accrued Interest

QUESTION 10

A customer must have "control" over the good or service in order for a performance obligation to be considered as having been satisfied for purposes of revenue recognition.

	A.	TRUE
	B.	FALSE

Should be easy, answer questions and give ashort explanation

I give 1 star if you just guess

A company purchased a tract of land for itsnatural resources at a cost of $1,570,000. It expects to mine2,800,000 tons of ore from this land. The salvage value of the landis expected to be $270,000. The depletion expense per ton of oreis:

$.10

A company's balance sheet shows: cash$21,000, accounts receivable $17,000, office equipment $53,000, andaccounts payable $14,000. What is the amount of equity?

	$14,000.
	$105,000.
	$24,000.
	$77,000.
	$60,000.

A company had net sales of $32,000 and ending accounts receivableof $2,800 for the current period. Its days' sales uncollectedequals (rounded):

32 days

MOP Co. leased a portion of its store to another company for eightmonths beginning on October 1, 2009 at a monthly rate of $1,000.This other company paid the entire $8,000 cash on October 1, whichMOP Co. recorded as unearned revenue. The journal entry made by MOPCo. at year- end on December 31, 2009 would include:

	A credit to Rent Earned for $3,000.
	A debit to Rent Earned for $3,000.
	A debit to Unearned Rent for $5,000.
	A credit to Unearned Rent for $3,000.
	A debit to Cash for $8,000.

Assume Sambazon.com sold an acai processing machine for $172,000cash. If accumulated depreciation on the sale date was $59,500 anda gain of $6,850 was recognized on the sale. What was the originalcost of the asset?

	$66,350
	$224,650
	$165,150
	$112,500
	$217,800

Plopper Cola bought $5,500 worth ofmerchandise from VisCom and signed a 75-day, 9% promissory note forthe $5,500. VisCom's journal entry to record the sales portion ofthe transaction is:

Notes Receivable	5,500
Interest Receivable	495
Sales		5,995

Notes Receivable	5,500
Sales		5,500

Accounts Receivable	103
Sales		103

Notes Receivable	103
Sales		103

Accounts Receivable	5,500
Sales		5,500

At the end of the day, the cash register's record shows $935 butthe count of cash in the register is $1,050. The proper entry torecord this excess includes a:

	Debit to Cash for $115
	Debit to Cash Over and Short for $115
	Credit to Cash for $115
	Debit to Petty Cash for $115
	Credit to Cash Over and Short for $115

coppermole152

ACC 332 Lecture 1: ACC Class Notes 3:7

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