🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
HomeTextbook Notes300,000US110,000

ACCT 301 Chapter Notes - Chapter 5: Asset Turnover, Inventory Turnover, Gift Card

52 views4 pages
School
Old Dominion University
Department
Accounting
Course
ACCT 301
Professor
Jong Park

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

Lo5 1: state the core revenue recognition principle and the five key steps in applying it. Companies recognize revenue when goods or services are transferred to customers for the amount the company expects to be entitled to receive in exchange for those goods or services. Lo5 2: explain when it is appropriate to recognize revenue at a single point in time. Revenue should be recognized at a single point in time when control of a good or service is transferred to the customer on a specific date. Lo5 3: explain when it is appropriate to recognize revenue over a period of time. Revenue should be recognized over time when a performance obligation is satisfied over time. Lo5 4: allocate a contract"s transaction price to multiple performance obligations. A contract"s transaction price is allocated to its performance obligations. The allocation is based on the stand-alone selling prices of the goods and services underlying those performance obligations.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

ACC 3000 Chapter Notes - Chapter 5: Income Statement, Best Buy, Consignor
scarletsnail973
MGMT 120A Chapter Notes - Chapter 5: Current Liability, Consignee, Gross Profit
ivorykangaroo452
ACCT30110 Lecture Notes - Lecture 21: Profit Margin
pearhamster270

Related Questions

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?

A.

Tax preparation services
B.

Tax preparation services and tax consulting services
C.

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 entity’s 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

LMC Solutions(LMC) is a publicly-traded marketing company that offers a variety of marketing offerings to its customers. Specifically:

• LMC will create a TV commercial for $1M, build an app for $500K, and build a Facebook page for $250K. These amounts represent LMC’s charges for these items when LMC sells them separately to customers. The TV commercial, the app, and the Facebook page are not interrelated; that is, each functions independently of the other offerings.

• If a customer purchases all aforementioned items together, the total cost is $1.5M. Payment terms are 50 percent consideration due at contract signing, with the remaining 50 percent due over the rest of the development period (25 percent at mid-point, 25 percent at completion).

• If the app is downloaded 500K times or more in the first month, there is a one-time bonus of $250K payable to LMC.

Acme Equipment Co., a customer, approaches LMC with the hopes of reinventing its image to a younger customer base. Acme has a verbal agreement with LMC that is based on LMC’s unsigned quote to Acme on January 15, 2018, for one TV commercial, one app, and a Facebook page. The agreement creates enforceable rights and obligations pursuant to LMC’s customary business practices. None of these items can be redirected by LMC to another customer. LMC performed a credit check on Acme and has determined that Acme has the intention and ability to pay LMC for fulfilling its portion of the contract. Acme is required to pay LMC for performance completed to date if Acme cancels the contract with LMC for reasons other than LMC’s failure to perform under the contract as promised.

Acme makes a payment on January 15, 2018, in the amount of $750K pursuant to the agreement. From the date of the quote, it takes LMC six months to develop and produce the TV commercial, two weeks to complete the Facebook page, and three months to complete a fully functioning app. LMC believes there is 40% chance that the app will be downloaded 500K times in the first month.

Required: Explain how LMC will determine the appropriate amounts of revenue to recognize under this contract. Your explanation should include all steps LMC must complete in the revenue recognition process and should identify the amounts and timing of LMC’s recognition of revenue. Cite appropriate authoritative support for your answer.

LMC Solutions(LMC) is a publicly-traded marketing company that offers a variety of marketing offerings to its customers. Specifically: • LMC will create a TV commercial for $1M, build an app for $500K, and build a Facebook page for $250K. These amounts represent LMC’s charges for these items when LMC sells them separately to customers. The TV commercial, the app, and the Facebook page are not interrelated; that is, each functions independently of the other offerings. • If a customer purchases all aforementioned items together, the total cost is $1.5M. Payment terms are 50 percent consideration due at contract signing, with the remaining 50 percent due over the rest of the development period (25 percent at mid-point, 25 percent at completion). • If the app is downloaded 500K times or more in the first month, there is a one-time bonus of $250K payable to LMC. Acme Equipment Co., a customer, approaches LMC with the hopes of reinventing its image to a younger customer base. Acme has a verbal agreement with LMC that is based on LMC’s unsigned quote to Acme on January 15, 2018, for one TV commercial, one app, and a Facebook page. The agreement creates enforceable rights and obligations pursuant to LMC’s customary business practices. None of these items can be redirected by LMC to another customer. LMC performed a credit check on Acme and has determined that Acme has the intention and ability to pay LMC for fulfilling its portion of the contract. Acme is required to pay LMC for performance completed to date if Acme cancels the contract with LMC for reasons other than LMC’s failure to perform under the contract as promised. Acme makes a payment on January 15, 2018, in the amount of $750K pursuant to the agreement. From the date of the quote, it takes LMC six months to develop and produce the TV commercial, two weeks to complete the Facebook page, and three months to complete a fully functioning app. LMC believes there is 40% chance that the app will be downloaded 500K times in the first month. Required: Explain how LMC will determine the appropriate amounts of revenue to recognize under this contract. Your explanation should include all steps LMC must complete in the revenue recognition process and should identify the amounts and timing of LMC’s recognition of revenue. Cite appropriate authoritative support for your answer.