Unformatted text preview: with sales on 1/1 earning 6 months worth of revenue, and sales on 6/30 earning 1 day of revenue. If sales proceed smoothly during the year, we can assume that, as of 6/30, they have made $320,000(.5) = $160,000 of sales. So, during that 6 month period, the $160,000 is outstanding an average of 3 months, and so should earn 3/24 x $160,000 of revenue, or $20,000. AACSB: Analytic AICPA FN: Measurement Blooms: Apply Difficulty: 2 Medium Learning Objective: 13-06 Demonstrate the appropriate accounting treatment for contingencies; including unasserted claims and assessments. Topic: Accounting for contingencies...
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- Spring '11
- $20,000, extended warranty, 1 Day, two-year extended warranty, Sunnyvale Computer Company